Inside Nancy Pelosi's Cybersecurity Portfolio

Good Morning,

Welcome to another edition of ChartWiz, where we visualize financial data in bite-sized portions. In today’s edition we break down recent earnings, in CrowdStrike as well as Pelosi’s investments in cyber-security.

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TRACKING PELOSI’S TRADES

Nancy Pelosi has once again highlighted her investment acumen in the cybersecurity sector with recent purchases in Palo Alto Networks (PANW). Following her 2020 trade in CrowdStrike (CRWD), these strategic investments underscore a keen eye on the burgeoning cybersecurity industry. Her recent trades include a purchase in PANW made on February 22, 2024, following closely after another on February 11, 2024, demonstrating a continued interest and confidence in the cybersecurity domain.

Dropping a cool few-hundred grand on each position, very cool 😎. Such large investments into the cybersecurity industry, what does she know?

INDUSTRY ANALYSIS

It just so happens that both of these companies, Palo Alto Networks (PANW) and CrowdStrike (CRWD) just happen to be the two largest IT companies in the U.S. Here’s a bird’s eye view of the industry.

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PANW EARNINGS BREAKDOWN

Palo Alto Networks continues to show impressive quarterly revenue growth, with its most recent quarter ending January 2024, reporting $1.98B in revenue.

PANW - HOW THEY MAKE MONEY

The company's revenue streams are diversified across product sales, subscription services, and support, with subscription services leading at $1.03B. This segmentation reflects the company's strategic focus on building a recurring revenue model, bolstering its market position and financial stability.

Palo Alto Networks is a multinational cybersecurity company known for its range of security products and services. They provide comprehensive cyber defense solutions that protect networks, cloud computing environments, and mobile devices. Here's what each segment of their revenue typically involves:

1. Product: This revenue segment comes from the sale of physical and virtual security appliances and endpoint security solutions. These products are typically hardware or software-based devices that are installed within a company's network or on specific devices to protect against threats and intrusions. Examples include firewalls, intrusion prevention systems (IPS), and advanced threat protection (ATP) devices.

2. Subscription: Subscription revenue is generated from services that customers pay for on a recurring basis. These services often include updates, security threat intelligence feeds, and access to cloud-based security services. Subscriptions ensure that customers receive continuous updates and improvements for their products, which can include new features, threat databases, and software updates to keep security measures up to date with the latest threats.

3. Support: This revenue comes from providing ongoing technical support and maintenance services to customers. This can include troubleshooting, software updates, hardware replacement, and other support services necessary to ensure the effective operation of security products and services. Support contracts are typically annual or multi-year agreements and provide a critical revenue stream for companies like Palo Alto Networks, ensuring that customers have access to help when they need it.

CRWD EARNINGS BREAKDOWN

CrowdStrike has demonstrated extraordinary growth in its quarterly revenue, showcasing the company's increasing dominance in the cybersecurity space.

CrowdStrike's focus on cloud-based security solutions has paid dividends, as evidenced by its remarkable Annual Recurring Revenue (ARR) growth. From Q1 2020 to Q4 2024, ARR surged from $364.6M to $3.4B, an 843.5% increase. This growth trajectory is paralleled by its quarterly revenue growth, which increased from $96.1M to $845.3M, a 779.9% increase over the same period. This demonstrates CrowdStrike's effective scale-up and the market's increasing reliance on cloud-based security solutions.

HISTORICAL RETURN

How $10,000 Invested in Palo Alto Networks (PANW), and CrowdStrike (CRWD) Would Have Returned Just 5 Years Ago.

Investing $10,000 in CrowdStrike (CRWD) and Palo Alto Networks (PANW) five years ago would have yielded significantly different outcomes compared to a similar investment in the S&P 500 Index (SPY). CRWD leads with a return of $55,664, followed by PANW at $35,827, both substantially outperforming the SPY's return of $18,646. This highlights the robust growth potential within the cybersecurity sector compared to broader market trends.

WORD FROM WIZ

That’s all we have for you in today’s edition of ChartWiz. If you found this valuable, please consider forwarding it to a friend.

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-Wiz

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