why is CRWD dropping after hours?

CrowdStrike Holdings (CRWD) has experienced a significant drop in its stock price after hours, which can be attributed to several factors:

1. Technical Outage: On July 19, 2024, CrowdStrike issued an automatic update for its flagship Falcon Sensor security product, which contained a bug that affected 8.5 million Windows computers worldwide, causing a massive overnight outage. This outage disrupted businesses, including banks, broadcasters, and the healthcare sector, and left many affected machines unable to restart. The company warned that hackers were attempting to exploit the situation by distributing a malicious Zip archive. This incident has likely damaged the company's reputation and investor confidence.
2. Analyst Downgrades: Following the technical outage, several analysts downgraded their ratings on CRWD stock. For instance, Guggenheim downgraded CrowdStrike from buy to neutral, citing potential reputational damage and a possible impact on new business signings in the near term. Additionally, HSBC downgraded the stock from buy to hold with a price target of $302.00.
3. Valuation Concerns: Prior to the technical outage, there were concerns about CRWD's high valuation. The stock was trading at a price-to-earnings ratio that exceeded 700, making it one of the most expensive stocks in the market. The outage and subsequent reputation damage may have exacerbated these valuation concerns.

The combination of these factors has likely led to the significant drop in CRWD's stock price after hours. Investors are reacting to the company's technical challenges, reputational risks, and the potential impact on future business signings, all of which contribute to a less favorable investment case.