Cybersecurity companies are in a major hype cycle, i know. That was also the case during covid.
CrowdStrike currently trades at forward P/E of around 180 based on non-GAAP.
At such a high P/E multiple you are essentially paying for a lot of expected future growth upfront. Companies with high valuation multiples should at least in theory be among the most sensitive when bond yields and interest rates are increasing. The larger the portion of a company’s current value that depends on cash flows far out in the future, the more negatively a higher discount rate affects their present value.
On a duration adjusted basis if you model CrowdStrike as a long duration growth asset with an cash-flow duration of 20 years, a forward P/E of 200 at a 5.2% treasury yield would be equivalent to a P/E of 400 under the 1.7% treasury yields seen in late 2021, all else equal.
CrowdStrike peaked late 2021 at a forward P/E of around 460. The stock price went south 40% in one month and 50% in 3 months.
CrowdStrike is the most expensive cyber security company based on valuation multiples - its 3.5x higher compared to Peer median including FTNT, ZS, OKTA, PANW, GEN, RPD and TENB.
