Following a significant IT outage on July 19, cybersecurity behemoth CrowdStrike (CRWD) came under the spotlight for a bug in its software update that wreaked havoc on Microsoft (MSFT) systems worldwide. The repercussions of this incident were felt far and wide, with Microsoft witnessing a staggering $50 billion decline in market cap in a single day, and companies like Delta (DAL) grappling to restore normalcy.
In the aftermath of the outage, CRWD stock witnessed a 25% plummet, impacting around 8.5 million Windows devices globally. Despite facing downgrades from the likes of Guggenheim and BTIG, there’s a compelling argument to be made for grasping this dip as an investment opportunity, especially with stalwart Microsoft continuing to vouch for CrowdStrike’s credibility. Analysts posit that CrowdStrike’s long-term free cash flow potential remains robust, suggesting that the stock may be undervalued by as much as 16%. Furthermore, the surge in put option premiums hints at investor wariness but also opens up strategic avenues for astute players.
If you have a multi-year investment strategy, this correction could signal a window to acquire CRWD at a bargain, particularly if the company redoubles its efforts to redeem its reputation.
The Story of CrowdStrike Stock
Established in 2011, CrowdStrike (CRWD) is a frontrunner in the cybersecurity realm, offering cutting-edge security solutions for contemporary computing landscapes. Specializing in endpoint protection and threat intelligence, CrowdStrike harnesses cloud technology to combat sophisticated cyber threats. Its Falcon platform furnishes real-time protection and response capabilities, shielding organizations from diverse cyber onslaughts. With an emphasis on innovation and agility, the company commands a lofty market cap of $62.3 billion.
Renowned for outpacing the market, CRWD has surged by 65.6% over the past year. Nevertheless, the shares have receded by nearly one-third in the last month, erasing CrowdStrike’s year-to-date gains for 2024.
CrowdStrike’s Triumph in Q1 Earnings
Experiencing rapid expansion, CRWD has witnessed revenue catapulting from under $500,000 in 2020 to over $3 million last year – marking a phenomenal 535% surge. This impressive growth underscores the company’s scalability and the robust market demand for its cybersecurity offerings.
In April, CRWD unveiled its Q1 earnings results for the 2025 fiscal year, surpassing Wall Street’s projections on both the revenue and earnings fronts. Revenue hit $921 million, eclipsing expectations by $16.2 million and denoting a remarkable 30% year-over-year upswing. Net new annual recurring revenue (ARR) stood at $212 million, notching a 22% year-over-year increase.
Non-GAAP net income soared to $231.7 million, or $0.93 per share, outshining analysts’ forecasts by 4 cents per share. Moreover, free cash flow surged by 42% to a record $323 million, accounting for 35% of revenue, while non-GAAP operating expenses dipped to 57% of revenue from 61% in the previous year’s corresponding period.
Insights into CrowdStrike’s Future
Analysts envision earnings of $0.24 for the current quarter, reflecting a 300% surge year-over-year, or $0.98 on an adjusted basis. Revenue is anticipated to hit $960 million, aligning with management’s projections of EPS ranging from $0.98 to $0.99 on revenue spanning $958.3 million to $961.2 million.
Moving forward, the company is poised for growth, with initiatives like the Accelerate Partner Program designed to amplify ecosystem expansion and bolster Falcon platform adoption. This collaborative effort unites various cybersecurity partners, including VARs, MSPs, and cloud marketplaces.
Furthermore, despite concerns regarding brand damage post-outage, clinching the exclusive Customer’s Choice in the 2024 Gartner Peer Insights Voice of the Customer for Vulnerability Assessment underscores the platform’s excellence and robust market standing. This accolade underscores the company’s adept strategy in fostering valuable partnerships and cementing its leadership in cybersecurity innovation.
Analysts’ Take on CRWD
Cathie Wood’s Ark Invest, a widely-tracked asset management firm, scooped up CRWD shares post the IT fiasco, around $263 – even before the dip bottomed out. This move suggests Wood’s confidence that the glitch isn’t a fundamental quandary for CrowdStrike.
On a more cautious note, Guggenheim and BTIG downgraded their CRWD ratings from “Buy” to “Neutral,” anticipating transient adversities for the stock in the aftermath of the outage.
However, the majority of Wall Street continues to rally behind CRWD, bestowing it with a consensus “strong buy” rating. The average 12-month price target for CRWD hovers at $375.85, marking a 46% premium over its prevailing level. Out of 41 analysts monitoring the stock, 32 advocate a “strong buy,” 3 recommend a “moderate buy,” and 6 suggest a “hold” stance.
Concluding Thoughts on CRWD
A stalwart in the cybersecurity domain, CrowdStrike stands tall on the pillars of strong fundamentals and technological innovations. Despite weathering a turbulent phase, its future prospects gleam brightly, as it continues to be the preferred choice for myriad Fortune 500 majors.
Further, the cybersecurity arena is poised to surge past the $299 billion threshold by 2028, with CRWD strategically positioned to carve out a substantial slice of this burgeoning market. As the spheres of artificial intelligence (AI) and cloud services continue to burgeon, companies like CrowdStrike are primed to fortify their leadership even further.