🛡️ Crowdstrike, the King of Cybersecurity

MARKET UPDATE

Good Morning Investor! Shares of Hewlett Packard ($HPE) surged 17% in pre-market trading, after the company reported earnings well above analyst estimates, driven by robust AI server demand. European stocks rallied in anticipation of the European Central Bank’s (ECB) meeting on Wednesday with many investors anticipating the first rate cut since 2019.

TODAY’S BIG HEADLINES

Crowdstrike, the King of Cybersecurity

Big Tech is Distorting the Reality of the Market

Private Healthcare is Booming in the UK

CYBERSECURITY

Crowdstrike, the King of Cybersecurity 🛡️

The King Strikes Back: On Wednesday morning, shares of CrowdStrike ($CRWD) rallied almost 10% in pre-market trading, after posting quarterly earnings that made their competitors like Fortinet ($FTNT), Palo Alto Networks ($PANW), and Zscaler ($ZS) look like yesterday’s tech leftovers.

Cyber-Sensation: For a company projected to rake in $4 billion in revenue for the upcoming fiscal year, CrowdStrike’s growth is nothing short of sensational.

• Revenue steamrolled in at $921.04 million, increasing by a whopping 33% year-over-year and outmuscling analyst expectations by $16.22 million.

• Non-GAAP EPS beat estimates by $0.04, coming in at $0.93—a 63% improvement on last year’s earnings per share. It’s like watching a tech gladiator win round after round.

The Best Business Plan Since Sliced Bread: What makes CrowdStrike so irresistible to investors? High margins and a hefty chunk of subscription revenue. CrowdStrike’s genius lies in selling “modules” to its customers, turning upselling into an art form. This strategy has shot the company’s net retention rate well above 100%.

• For every dollar a customer spends, they’ll cough up $1.20 the next year.

• CrowdStrike reported annual recurring revenue of $3.65 billion (up 33% YoY), with $211.7 million being net new ARR added in the quarter.

• Their gross margin on subscription revenue stayed robust at 78%, same as last year. Module adoption rates? A cool 65% for five or more, 44% for six or more, and 28% for seven or more modules.

Gazing Into the Codebase: CrowdStrike further delighted shareholders by offering rosy earnings guidance for both the second quarter and the full fiscal year 2025. Both of which were bolstered by robust demand for their cybersecurity solutions.

• They forecast Q2 revenue of $958.3 million, topping the expected $956.25 million, and predicted EPS of $0.98 per share, a full 10% higher than the $0.91 analysts had expected.

• For the full fiscal year 2025, revenue and EPS projections comfortably sat above analysts' estimates, showing that this cybersecurity titan is far from slowing down.

MEGA CAPS

Big Tech is Distorting the Reality of the Market🧙

Earnings Season, The Final Countdown: We’re officially on the other side of what many investors might call a very successful earnings season, where the stock market felt more like a winner’s podium. With 98% of the companies in the S&P 500 having reported their quarterly earnings, the numbers are in, and it’s time to tally the score.

• Around 78% of companies managed to outdo earnings expectations, a figure that actually stands above historical averages.

• Across the index, earnings rose by 5.9%, while revenues across all sectors combined increased by 4.2% year-over-year.

• This marks the 14th consecutive quarter of revenue growth. And perhaps the most bullish indicator of all? Mentions of the dreaded "recession" on company earnings calls have taken a nosedive.

The Not-So-Magnificent Rest: But before we get too carried away, here’s the ugly truth: if we take the Magnificent 7 out of the equation—particularly the five giants responsible for 64.3% earnings growth (Amazon ($AMZN), Meta ($META), Nvidia ($NVDA), Alphabet ($GOOG), and Microsoft ($MSFT))—the picture isn’t so pretty.

• Without these powerhouses, the remaining 495 companies in the index combined saw negative earnings growth of 6% during the first quarter.

• Analysts, however, are optimistic that this will change, projecting a 17.3% earnings growth for the other 495 companies in the fourth quarter, still a bit shy of the 19.8% projected for the big five.

The Market's Heavy Lifters: As of April 17th, the Magnificent 7 now account for a whopping 29.7% weighting of the entire S&P 500, highlighting just how systemically important they’ve become.

• And if that wasn’t impressive enough, as of June 1st, the Mag 7 have returned a dazzling 25.75% year-to-date, while the S&P 500 as a whole has mustered a respectable but lesser 11.27%. It’s like watching seven heavyweight champions carrying the entire index on their shoulders.

HEALTHCARE

Private Healthcare is Booming in the UK🏥

To NHS or Not to NHS: Ah, the UK’s beloved National Healthcare Service (NHS)—championed in international conversations but not quite the knight in shining armor at home. What isn’t common knowledge outside of Britain is the NHS’s struggle to service its customers. Imagine a queue stretching from London to Edinburgh: that's the current state.

• According to the latest figures, the NHS now has a record-high 7.4 million people on its waiting list for specialist treatments, nearly double the pre-pandemic figure of 4.43 million.

• This growing list is driven by a deteriorating ability to service patients. With a median waiting time for treatment of 14.9 weeks—more than double the pre-COVID median wait of 6.9 weeks—it’s like queuing for the latest iPhone, but much less fun.

• About 3.23 million of these patients have been waiting over 18 weeks, while a staggering 309,000 have been waiting over a year for treatment. If patience is a virtue, Brits are becoming saints.

Private Sector to the Rescue?: Thanks to the NHS’s shortcomings, Brits are turning to private medical care in droves, according to a report released by the Private Healthcare Information Network (PHIN). This report states that a record 900,000 private in-patient admissions took place in 2023, a 7% increase from 2022.

• Patients are either shelling out monthly for private medical cover or paying out of pocket, with a 39% increase in self-funded private consultations since before the pandemic. It’s like upgrading from economy to business class, but for healthcare.

Cashing In on Care: According to a recently released report, five major corporations are cashing in on this shift towards private medical care.

• These lucky firms—Bridgepoint ($BPT.L), BUPA ($63LI), Centene ($CNC), Spire ($SPI), and UnitedHealth ($UNH)—have been awarded shares of public health and social care contracts worth a minimum of £70.59 billion ($90.31 billion) since 2013. Talk about hitting the healthcare jackpot.

MORE NEWS

Additional market-moving events🌎

TXSE vs NYSE: BlackRock and Citadel Securities-backed group are planning on launching a new Texas-based stock exchange. (Reuters)

You Are the Product: Meta’s Instagram photo sharing app has begun testing non-skippable ads. (TechCrunch)

PG Rated Social Media: Elon Musk’s X will now be allowing adult content on its platform, as long as it’s clearly labeled. (APNews)

AI Funding Continues: Cisco has officially launched a $1 billion fund which will focus on investing in AI startups. (RT)

EARNINGS

This Week’s Earnings Calendar📅

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,137.00 SEK (📉-13.36%)

• Hims & Hers Health: $21.71 (📈+50.31%)

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