CrowdStruck, Ambarella Reigns & Canadian National Embarrassment
I was caught … in the middle of a cyberattack. (Thunder!)
I looked ‘round … and I knew someone had my back. (Thunder!)
You’ve been … CrowdStruck!
The cybersecurity guru entered the earnings confessional last night with results that would make even a priest cry. The numbers were just that pretty:
- Earnings per share: Up 266% to $0.11, versus $0.07 expected.
- Revenue: Up 70% to $337.7 million, versus $323.2 million expected.
And those are just the headline numbers. CrowdStrike also had annual recurring revenue soar 70%, net new annual recurring revenue top estimates and subscriber growth jump 81% to 13,080 customers.
And if that wasn’t enough to get your blood pumping, CrowdStrike put third-quarter guidance above Wall Street’s targets. The company expects revenue of $361.5 million on earnings of $0.09 per share, compared to the consensus estimate for $351 million in sales on earnings of $0.09 per share.
But … what’s this? CRWD stock dropped nearly 2% in premarket trading and then held those losses into the close. How’s that possible?
Well, Great Ones, CRWD stock isn’t the first to experience a “sell on the news” event this year, and it won’t be the last. The shares surged more than 23% heading into last night’s quarterly report, as investors bought CRWD anticipating stellar results.
They got the impressive results they wanted out of CrowdStrike … and got the return they wanted to boot. So, why not sell and take profits?
To those people, I’d say you’re missing the bigger picture. Sure, that 23% short-term gain looks great … but have you ever had a 400% long-term winner?
Great Stuff Picks readers have, and they are currently sitting on a massive 400%-plus gain in CRWD — if you got in when I recommended the stock in January 2020.
With the rise in cyberattacks, hacking, phishing, ransomware … you name it … the cybersecurity market grows ever larger by the second. And I selected CrowdStrike because its advanced AI learns to sniff out potential unknown threats before they become major issues.
This active AI learning sets CrowdStrike apart from the likes of McAfee and Norton — which, let’s face it, barely react to known issues when you click on them in your email, let alone unknown issues.
If you want more proof … just remember that CrowdStrike is the company SolarWinds reached out to for help when the U.S. government was hacked last year.
Now, for you CRWD newbies out there, the stock isn’t anywhere near as cheap as it was back in January 2020 when I recommended it. But that doesn’t mean there isn’t more upside coming.
You can still buy CRWD stock … and today’s pullback might just be the opening you were looking for to strike hard, strike fast and show no mercy!
Editor’s Note: The $700 Billion Electric Vehicle Industry Collapses Without THIS
The entire electric vehicle revolution would stop dead in its tracks without one strange material.
It’s a classic supply/demand setup: massive demand and one company that dominates the limited domestic supply.
The Good: Under My Ambarella, Ella, Ella
There’s no raining on Ambarella’s (Nasdaq: AMBA) parade today. The camera-on-a-chip company reported its third straight quarter of earnings and sales growth. Revenue topped expectations by a $3.5 million hair, while earnings beat Wall Street’s estimates by $0.10 per share.
Wait a second, Mr. Great Stuff. You mean to tell me there are other chipmakers besides AMD and Nvidia?
Indeed! But hardly any of them are worth writing home about, thanks to continued supply shortages eating into their profits. That’s why Ambarella’s earnings beat is such a big deal … and why AMBA investors were all likely drunk before noon.
If you’re unfamiliar with Ambarella, it makes itty-bitty cameras that go on chips. The company gained early success by supplying video-processing chips to GoPro (Nasdaq: GPRO), and then Ambarella hit superstardom when it later scored Apple (Nasdaq: AAPL) as a customer.
But if you hadn’t noticed, GoPro is all but dead — it’s not dead, it’s just resting … beautiful plumage — and smartphone sales are drier than the Sahara. So, instead of just letting the chips fall where they may, Ambarella reinvented itself and started honing its video-processing chips for other industries.
Specifically, the company now specializes in “stereovision” — using two synchronized cameras to create a 3D map of the space around an object. These chips help devices “see” the world around them and process information, making them perfect for the self-driving car market.
You can see where I’m going with this. All those Autopilot crashes aside, autonomous cars will inevitably drive us into the future. And Ambarella’s tech can help to get us there safely.
Ambarella may be worth checking out … once its earnings rally dies down. AMBA shares just popped 25%, and y’all know we don’t chase rallies (or waterfalls).
But if self-driving cars and the tech needed to power them are your particular cup of Earl Grey … we’ve got you covered. Click here to catch up!
The Bad: The 3 EV Amigos
Shouldn’t that be: “The Three EV Péngyǒumen?” I mean, they’re Chinese … not Mexican!
True, but have you watched the Three Amigos! in Chinese? Also, I don’t speak or read Mandarin … so, Spanish is what you’ll get, and you’ll like it.
Anyway, this trio of Chinese EV makers reported impressive year-over-year growth in deliveries: Nio’s up 48%, XPeng is up 172% and Li Auto’s up an astonishing 248%.
But month-over-month growth? Not so much. Both Nio and XPeng saw monthly deliveries decline from June, while Li Auto is so new, it didn’t have anywhere to go but up.
Furthermore, all three warned that the semiconductor shortage would reduce deliveries in the coming months. Now, this is nothing new for Wall Street. Practically every automaker on the planet has said the same thing at this point.
Both NIO and LI fell like rocks in premarket trading but recovered throughout the day. Why did they recover? Maybe because they weren’t XPeng.
You see, XPeng not only warned about a chip shortage, it also said it will change up its production mix. In layman’s terms, XPeng is gearing up to transition away from making its G3 SUV in order to make the G3i SUV for Zhaoqing Smart EV Manufacturing.
Sure, Zhaoqing is a wholly owned subsidiary of XPeng … so the revenue will still flow. But the G3 SUV is one of XPeng’s hottest new EVs. So, not only does XPeng face delivery slowdowns due to retooling and chip shortages, but the move to Zhaoqing’s G3i could also weaken the branding of XPeng’s own SUV.
It’s this uncertainty surrounding XPeng that has XPEV as the lone “EV amigo” to finish in the red today.
The Ugly: Long Train Runnin’ … Nowhere
What started out as a simple courtship — it was only a kiss! — has turned into a long-running railroad regulator debacle.
Everyone’s twiddling their thumbs waiting to see if regulators approve Canadian National Railway’s (NYSE: CNI) takeover bid for Kansas City Southern (NYSE: KSU) or if fellow suitor Canadian Pacific Railway (NYSE: CP) will take KSU to the dance.
And by “the dance,” I mean creating the first railroad connecting Canada, the U.S. and Mexico. It’s kind of a big deal. A big enough deal, as it turns out, that regulatory approval for the KSU/CNI merger looks unlikely.
Today, the Surface Transportation Board (STB) rejected CNI’s plans to form a voting trust, which would facilitate the merger by letting KSU shareholders receive their payout sooner. In a way, a CNI voting trust could have been seen as the STB giving their nod of approval for the deal … before the deal goes through.
Think of this like a proxy tender offer. (Thanks, that clears up nothing.) Since there are so many potential regulatory hurdles for the CNI/KSU deal, the board is saying the voter trust could actually hurt investors, should they sell their KSU shares only for the merger to (eventually) be blocked.
The STB did, however, approve Canadian Pacific’s voting trust for its KSU bid. This tells us that the board would much rather Canadian Pacific take over KSU than CNI from a regulatory standpoint — CNI’s higher bids notwithstanding.
And now, Canadian Pacific’s plan is crystal clear: It wasn’t chasing CNI’s bidding war higher simply because it didn’t need to. Canadian Pacific either knew (or bluffed) that CNI’s deal was unlikely to make it past the regulators alive. And it hasn’t … yet, at least.
So, while it looked like Canadian Pacific was lowballing, the company was just waiting in the wings for CNI to fall, then win the KSU courting competition by default — and for a less princely sum, at that. Smooth move, Ex-lax.
KSU initially tanked before ending the day up 3% — hey, it’s still being taken over either way. Canadian Pacific shares are up 6% today as its cheaper takeover deal looks more and more likely. CNI stock is up 3% today because maybe it didn’t need KSU that bad … just brush off the rejection and move on.
It’s poll time, Great Ones! Your signal that the weekend is now in sight … if you squint.
Last week, we wanted you to vote for your favorite renaming of the Tesla Bot — and y’all Great Ones never turn down a chance to be caustically creative. Thank you for answering our poll!
52.5% of you hope Elon calls his AI-bot cronies the “MUSKeteers,” while another 27.1% of you went with the slightly less self-centered “Elon 2.” Up next was “TeslaThor Mk. 1” with 8.5%, followed by “RoboTess” with 6.8%.
And while only 5.1% of you voted for “iBot,” I appreciate you sharing your voice all the same. I, for one, would have loved to see Apple lose its ever-loving mind over that one. But to each his own…
Now robot catastrophes are all fine and funny, but today’s poll, on the other hand, is a bit more serious. Well … as serious as we get around here.
We’re talking about one of the most existential threats humanity has ever created — a rising tide of digital terror that markets and world governments alike must reconcile with.
I thought we were moving on from the (potentially) killer robots?
Sure, I joke about mutually assured robot destruction here and there — nice story, tell it to Reader’s Digest! — but the threat of cybersecurity is already here. It’s been here.
And besides a few cyber-curious Great Ones writing in asking about security picks, I don’t think many investors are ready to have the “cybersecurity” conversation. (Shocking, I tell you!) Considering cybersecurity underpins literally every industry we can invest in … it’s time we asked you:
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Also, if you’re like the rest of your fellow Great Ones, I know you’ve got more to say than a mere poll can satiate. Luckily, we have a whole day dedicated to replying to your emails — it’s tomorrow. So write in now with your tales of cybersecurity fortunes and woes, won’t you?
GreatStuffToday@BanyanHill.com is your one-stop shop for ranting, raving and a whole lotta rambling too. We love it all, so write to us now!
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Until next time, stay Great!
Editor, Great Stuff