Cloudflare Vs CrowdStrike Stock: Which Is Best?

Cloudflare Inc (NYSE:NET) and Crowdstrike Holdings Inc (NASDAQ:CRWD) are in demand as more organizations make cybersecurity a priority. The push to working, schooling, and playing from home highlighted the inherent security risks of connected technology.

Security is only getting more important as artificial intelligence (AI) and the Internet of Things (IoT) become more widespread. If you want to invest in Cloudflare vs CrowdStrike, which is the better bet?

Each company is relatively young, and they both held their initial public offerings (IPO) in 2019. The increased migration to online work made it clear cybersecurity is vital, and each company quadrupled its market capitalization by year end.

Of course, the reason these two companies are doing so well may be the FireEye and SolarWinds hacks that took down two strong rivals in late 2020 and made for reduced competition.

Let’s run a vulnerability scan on these two companies to determine which should have a stronger future for investors.

Is Cloudflare Stock A Buy?

Cloudflare is on a mission to build a better internet using technology to reinforce trust. It’s also protecting the cloud-based mobile internet, which means it has servers for companies to securely store and access data with a 100 percent uptime guarantee.

Its biggest customer is perhaps Shopify, which itself is an essential enterprise tool.

Cloudflare share price caved to a 52-week low of $15.05 before climbing to a record over $85.00 per share. Although this is a historic high, some analysts believe it can continue growing.

Cloudflare’s customer list keeps growing, and fueled $114 million in revenue for the third quarter 2020. This is a 54 percent year-over-year increase from 2019.

Boding well for what’s to come, enterprise customers often sign multi-year contracts with predictable revenue.

And its growing cyberthreat capabilities are currently protecting over 26 million web properties through its paid and freemium subscriptions. This gives it real-world data from the frontlines of the cyber war, with a lot of companies depending on it.

CrowdStrike Annual Recurring Revenue Near $1Bn

CrowdStrike share price crashed to $31.95 at the onset of the worldwide lockdowns before climbing to an all-time high of $216.55 per share by the end of the year.

The company provides endpoint security, threat intelligence, and cyberattack response services to enterprises, governments, and other organizations.

Cybersecurity value became clear in 2020 as everything from COVID-19 vaccines to retailers and government agencies were targeted by attacks.

SolarWinds even used CrowdStrike’s Falcon Endpoint Protection suite to secure its systems. Imagine the CEO of Ford broke down on the side of the road and was picked up by the CEO of GM in Chevy. That’s basically what happened to SolarWinds.

CrowdStrike’s third fiscal quarter of 2021 reported $232.5 million, which is an 86 percent year-over-year increase from pre-pandemic days.

Subscription revenue alone hit $213.5 million, and annual recurring revenue (ARR) reached $907.4 million by the end of October.

That helped the company grow free cash flow to $76.1 million, up from $7.0 million in the same quarter of the prior year. It’s about time for CrowdStrike to go on a spending spree and pay investors back in a big way.

Cloudflare A Hacker Target But Is It Immune?

The SolarWinds hack was brought up several times in this article, and it would be foolish to read through and think either Cloudflare or CrowdStrike are invincible.

In reality, both companies are high-value targets to hackers, which is why rival SolarWinds was hacked in the first place.

Cloudflare CEO Matthew Prince told Jim Cramer of CNBC’s “Mad Money” that zero-trust architecture is the key to protecting companies. He used the analogy of bulkheads in a ship keeping it from being completely flooded and sinking it.

Anyone who’s seen Titanic knows the flaw in this logic.

Still, cybersecurity companies are working together towards a common goal. That’s not something normally seen between market competitors. Both Cloudflare and Okta (OKTA), along with SolarWinds and FIreEye, all work with CrowdStrike.

Dangers of Investing In CrowdStrike

CrowdStrike is in a precarious position in that it benefits from cyberattacks. It’s like the SWAT team or Special Forces, instead of the regular police or soldier. The company is often called in to clean up digital crime scenes, so to speak.

And this is the inherent problem in the cybersecurity industry. The better it works, the less visible it is. Over time, it’s high-profile cyberattacks in the media that ultimately serve as marketing to drive customers to amp up cybersecurity.

Even Target (TGT), which is often used as a cyber security horror story over its 2013 data breach, is now looking at CrowdStrike for its security.

The bigger it grows, the more likely it is that CrowdStrike gets targeted and even breached by hackers. With so many big contracts on the line and massive government fines possible, nobody wants to be the victim of a cybersecurity breach.

Like Rocky Balboa or whoever’s sitting on the Iron Throne in King’s Landing, whoever is in charge has a lot of invisible enemies hunting for the crown.

CrowdStrike Vs Cloudflare Stock: The Bottom Line

CrowdStrike and Cloudflare work together to build a stronger and safer internet. This mission is more important than ever in a virtual environment. We thought it would happen much later, but the forced a stay-at-home orders have accelerated the timeline.

Hackers and pirates are attacking everything from COVID-19 vaccine candidates to streaming content releases in post-production. Our cloud-based world is stretching to include AI and the Internet of Things (IoT).

Both companies have a strong online presence and a lot of valuable company data under their umbrellas. This drove stock prices up and put targets on their heads. Cybersecurity spending is expected to increase over the next year, so either should be a competent stock for investors over the next decade.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.