CrowdStrike Stock Slumps as Earnings Forecast Disappoints

CrowdStrike (CRWD) shares slumped on Wednesday, a day after the cybersecurity company reported an unexpected loss for the third quarter. Despite the setback, analysts remained bullish on the stock, with some raising their price targets. The company's shares have gained more than one-third of their value since the start of the year.

CrowdStrike's earnings disappointment can be attributed to a few specific factors. In July 2023, the company experienced a massive outage that crashed more than 8.5 million of its customers' computers worldwide. This outage led to a 42% drop in CrowdStrike's stock price, as investors feared it would trigger a customer exodus and a sharp drop in revenue. However, the company has since recovered, and its stock has soared to a record high, indicating that businesses have not abandoned the Falcon platform.



Despite the initial concerns, management has not reduced its long-term revenue forecast, suggesting that the outage's negative effects are likely to be minimal. The company's strong platform and customer loyalty have allowed it to maintain its market leadership and continue to grow. In fact, management recently increased its revenue forecast for fiscal 2025 and reiterated its long-term goal to reach $10 billion in annual recurring revenue (ARR) by fiscal 2031.



Analysts from Mizuho, Wedbush, and Citi maintained their bullish views on the stock, with some raising their price targets. Mizuho analysts wrote, "Despite the increased near-term uncertainty, we remain steadfast in our view that CRWD’s cloud security platform is very differentiated." Wedbush analysts boosted their price target, noting that CrowdStrike beat revenue expectations in the third quarter and raised its full-year guidance. Citi analysts were even more bullish, lifting their price target for the stock to $400 from $300, citing the company's "impressive" revenue milestone above $1 billion for the quarter and "higher conviction on out-year forecasts."



In conclusion, while CrowdStrike's earnings forecast disappointed investors, the company's strong platform and customer loyalty have allowed it to maintain its market leadership and continue to grow. Despite the initial concerns about a potential customer exodus, the company has recovered, and its stock has soared to a record high. Analysts remain bullish on the stock, with some raising their price targets. As the company reports its final results for fiscal 2025 on March 4, investors should look for any revisions to the long-term forecast and whether revenue for the year comes in as expected.