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On July 19, cybersecurity giant CrowdStrike (CRWD) caused a significant IT outage due to a bug in one of its software updates, impacting devices running on Microsoft (MSFT) platforms at companies worldwide. Microsoft alone lost around $50 billion of market cap in a single day, and companies like Delta (DAL) struggled to return to normal operations.
CRWD stock has plunged 25% since the outage, which affected approximately 8.5 million Windows devices, or roughly 1% worldwide. While the immediate fallout has been severe, leading to downgrades from firms like Guggenheim and BTIG, it's worth considering whether this dip presents a buying opportunity - particularly as partner firm Microsoft continues to back Crowdstrike. And analysts suggest that despite the crisis, CrowdStrike's long-term free cash flow potential remains strong, with the stock potentially undervalued by at least 16% from its current price. Additionally, the sharp increase in put option premiums signals heightened investor caution and presents strategic play opportunities.
For investors with a multi-year investment horizon, this correction might offer a chance to acquire CRWD at a discount, especially if the company can take steps to restore its reputation.
About CrowdStrike Stock
Founded in 2011, CrowdStrike (CRWD) is a leading cybersecurity company that provides security solutions for modern computing environments. The company specializes in endpoint protection and threat intelligence; CrowdStrike leverages cloud technology to defend against sophisticated cyber threats. Its Falcon platform delivers real-time protection and response capabilities, safeguarding organizations from a wide array of cyberattacks. With a focus on innovation and agility, the company commands a market cap of $62.3 billion.
The cybersecurity company has a reputation for outperforming the market, as CRWD is up by 65.6% over the past year. However, the shares are down by nearly one-third over the past month, which has erased CrowdStrike's YTD gains for 2024.
CrowdStrike Beats on Q1 Earnings
CRWD is a rapidly expanding growth company, with revenue increasing from less than $500,00 in 2020 to more than $3 million last year - up nearly 535%. This shows the company's impressive scalability and strong market demand for its cybersecurity solutions.
In April, CRWD reported its Q1 earnings results for the 2025 fiscal year, which beat Wall Street's estimates on the top and bottom lines. Revenue came in at $921 million, smashing the consensus expectations by $16.2 million, and marking an impressive 30% increase year-over-year. Net new annual recurring revenue (ARR) was $212 million, up 22% year over year.
Non-GAAP net income increased to $231.7 million, or $0.93 per share, which topped analysts' expectations by 4 cents per share.
Plus, free cash flow rose 42% to a record $323 million, or 35% of revenue, while non-GAAP operating expenses fell to 57% of revenue from 61% in the year-ago period.
What's the Forecast for CrowdStrike?
For the current quarter, analysts anticipate earnings of $0.24, representing 300% growth year-over-year, or $0.98 on an adjusted basis. Revenue is projected at $960 million. That's in line with management's guidance, which called for EPS of $0.98 to $0.99 on revenue of $958.3 million to $961.2 million.
Going forward, the company has promising growth drivers, including the Accelerate Partner Program designed to boost ecosystem growth and enhance Falcon platform adoption. This initiative brings together a range of cybersecurity partners, such as VARs, MSPs, and cloud marketplaces.
Additionally, while there are concerns over the brand taking a hit post-outage, being recognized as the sole Customer's choice in the 2024 Gartner Peer Insights Voice of the Customer for Vulnerability Assessment underscores the platform's excellence and strong market position. This recognition highlights the company's effective strategy in fostering valuable partnerships and solidifying its leadership in cybersecurity innovation.
What Do Analysts Expect For CRWD?
Cathie Wood's Ark Invest, a widely followed asset management company, loaded up on CRWD shares right after the IT outage, around $263 - before the dip had quite found its bottom. The purchase suggests Wood is confident the glitch isn't a major fundamental issue for CrowdStrike.
On a more cautious note, Guggenheim and BTIG both downgraded their CRWD ratings from “Buy” to “Neutral,” with both analysts anticipating short-term negative impacts for the stock in the wake of the outage.
However, Wall Street has largely stood behind its bullish rating for CRWD, which has a consensus "strong buy" rating. The average 12-month price target for CRWD is $375.85, representing a 46% premium from its current level.
Out of 41 analysts covering the stock, 32 have a "strong buy" rating, 3 have a "moderate buy," and 6 have a "hold" rating.
The Bottom Line on CRWD
CrowdStrike still remains a top cybersecurity play, backed by strong fundamentals and tech advancements. Although the company is going through a rough patch, its future prospects look promising as it remains the go-to for many top major Fortune 500 companies.
Moreover, the cybersecurity market is expected to steamroll past the $299 billion mark by 2028, and CRWD is well-positioned to capture a huge slice of that growth. As artificial intelligence (AI) and cloud businesses continue to grow, companies like CrowdStrike have the opportunity to expand their potential leadership further.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
