CrowdStrike Stock Is a Screaming Buy, Wall Street Says

Analysts say CrowdStrike (CRWD) is on deep discount after shares plunged following disappointing guidance.

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Analysts say CrowdStrike (CRWD) is a buy on the dip after shares in the cybersecurity company lost more than 20% of their value at one point in early Wednesday trading.

CrowdStrike, which provides cloud-based data protection, threat intelligence and security services, posted third-quarter results late Tuesday that exceeded Wall Street estimates, but the firm issued a disappointing revenue outlook for the current quarter.

For the record, CrowdStrike reported third-quarter adjusted earnings per share (EPS) of 40 cents. That beat the Street's average estimate for adjusted EPS of 32 cents, according to S&P Global Market Intelligence. Revenue came in at $580.9 million, easily topping analysts' forecast for $475.1 million in revenue.

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Stocks, however, are forward looking, and thus shares in CrowdStrike cratered after management warned that ongoing fourth-quarter revenue was likely to disappoint the Street. CrowdStrike forecast current-quarter revenue in a range of $619.1 million to $628.2 million, whereas analysts were looking for revenue of $633.9 million.

CrowdStrike CEO George Kurtz said new subscriptions came in below expectations as enterprise customers fret about an economic slowdown

"We expect these macro headwinds to persist through Q4," Kurtz said on a conference call with analysts.

And yet analysts who follow CrowdStrike largely shrugged off the news and maintained their highly bullish stance on the name.

For example, CFRA Research analyst Janice Quek maintained her Strong Buy recommendation on shares in CrowdStrike, even as she lowered her target price to $157 from $281.

"We see evidence of continuing strong demand and healthy cybersecurity budgets, albeit a moderating pace of purchase activity and lengthening sales cycles with non-enterprise accounts that will shrink sequential net ARR [annual recurring revenue] growth in the short term," Quek wrote in a note to clients. 

The analyst's new price target of $157 still gives CrowdStrike stock implied upside of more than 40% in the next 12 months or so.

Morgan Stanley analyst Hamza Fodderwala, who rates CrowdStrike at Overweight (the equivalent of Buy), said the steep pullback in CRWD stock provides "an attractive entry point to accumulate shares in a premier software-as-a-service security franchise."

And those two analysts are hardly alone in their optimism.

CrowdStrike receives a consensus recommendation of Strong Buy from the 40 analysts covering the stock tracked by S&P Global Market Intelligence. Twenty-nine analysts rate CrowdStrike at Strong Buy, eight say Buy and three have it at Hold.

Perhaps most intriguing, after Wednesday's rout, the Street's average price target of $187.31 gives CRWD stock implied upside of 70% in the next year or so. 

Dan Burrows
Senior Investing Writer,

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.