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CrowdStrike’s 20% surge sparks cybersecurity stock rally

CrowdStrike, surged 10% on Wednesday and sparked a rally in cybersecurity stocks after the company’s upbeat annual forecasts signalled robust demand for the one-stop platform for a variety of tools amid a rise in artificial intelligence-led sophisticated attacks.

Dominant cybersecurity firms offer different services through a unified platform to cater to clients tired of dealing with different vendors and still facing breaches.

High-profile hacks such as the recent attacks at a unit of healthcare firm UnitedHealth, and drug distributor Cencora, are also aiding demand for the cybersecurity sector.

Experts expect the trend to continue as generative AI tools add advanced cybersecurity skills to adversaries’ arsenals.

Generative AI tools have made it easier to write programs, including those for malicious purposes, said Mark Daley, chief AI officer at Canada’s Western University. Meanwhile, state-backed hackers are using tools from Microsoft-backed OpenAI to trick their targets, a report said last month.

CrowdStrike’s results also offered some respite to investors worried about the sector after heavyweight Palo Alto Networks cut its forecast last month due to softer client spending and steep promotions.

CrowdStrike’s market value jumped to about $79 billion, bringing it closer to the most valuable U.S. cybersecurity firm, Palo Alto Networks, which has a market value of about $90 billion.

“(CrowdStrike) does feel like the next mega-cap company and the first to truly separate itself from the rest of the younger enterprise software companies,” said investor Ophir Gottlieb, CEO of Capital Market Laboratories.

Shares of other cybersecurity firms such as Check Point Software, Fortinet, and SentinelOne (S.N), rose between 0.8% and 4.9%.

CrowdStrike forecast its annual adjusted profit to be between $3.77 and $3.97 per share and revenue in the range of $3.92 billion to $3.99 billion, both above Wall Street estimates.

Finance chief Burt Podbere said on an earnings call the forecast assumes a tough economic backdrop, as high interest rates were continuing to weigh on client spending.

The stock trades at 74.47 times its forward earnings estimates, higher than Palo Alto’s 49.09 and Fortinet’s 39.01. Reuters

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