CrowdStrike CRWD, a leader in next-generation endpoint protection, threat intelligence, and cyberattack response services, has been at the forefront of headlines following a global IT outage that halted many aspects of the economy and affected many Microsoft MSFT Windows devices.
It’s been a rough few days for the stock, reflective of the incident. But is the move a buying opportunity, or should investors stay on the sidelines until we learn more? Let’s take a closer look.
CrowdStrike Plunges
The recent move has pushed valuation multiples down, with shares currently trading at a 14.3X forward 12-month price-to-sales ratio compared to a 23.8X high just this year. The company is forecasted to see 30% sales growth in its current fiscal year, though it’s critical to note that these expectations will likely be adjusted following the fiasco.
In addition, Guggenheim Securities, BTIG, and Scotiabank all downgraded their ratings for the stock from ‘Strong Buy’ to ‘Hold’ just this week, again reflecting the potential negative ramifications.
Microsoft released a statement following the incident, stating, ‘While software updates may occasionally cause disturbances, significant incidents like the CrowdStrike event are infrequent. We currently estimate that CrowdStrike’s update affected 8.5 million Windows devices, or less than one percent of all Windows machines. While the percentage was small, the broad economic and societal impacts reflect the use of CrowdStrike by enterprises that run many critical services.’
While the recent dip is certainly appetizing, given the company’s established nature and pure size, investors should wait on the sidelines until the situation becomes clearer. In addition, its current Zacks Rank #5 (Strong Sell) rating alludes to further near-term share pressure.
Competition Looks to Pounce
Given the recent development, several cybersecurity stocks could see some beneficial tailwinds, such as Palo Alto Networks PANW. The company’s current year outlook has remained bullish, with the $5.57 per share expected up 12% over the last year.
Image Source: Zacks Investment Research
Palo Alto Networks’ sales growth is also expected to remain strong, forecasted to jump 16% in its current fiscal year. The stock has remained on a strong growth trajectory, posting double-digit percentage year-over-year revenue growth rates in each of its last ten quarterly releases.
Below is a chart illustrating the company’s sales on a quarterly basis.
Image Source: Zacks Investment Research
Bottom Line
The recent CrowdStrike CRWD fiasco that brought down Microsoft MSFT devices has certainly brought about some headwinds for the stock, plunging following the incident.
While the rough price action could be seen as a buying opportunity among some, the company’s cloudy earnings outlook, reflected by its Zacks Rank #5 (Strong Sell) alludes to further share pressure in the near term. Instead, investors should pivot to stocks enjoying positive earnings estimate revisions.
Further, we could be in the early stages of the incident, with the overall impact not yet fully understood. A rival, Palo Alto Networks PANW, could see buying pressure given its competitive nature with CrowdStrike.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
