CrowdStrike is among the most disputed stocks on Wall Street since its faulty software update on July 19, 2024 has been responsible for the largest global outage in history, affecting millions of Windows-based devices, transactions and cloud services, check-in systems at airports etc. The cybersecurity giant lost nearly half of its market value during the next couple of weeks following the incident, which was equivalent to about $50 billion. CrowdStrike withstood a backstabbing blow conducted by its own program code bugs, however. Its shares managed to recover 88% of the one-off price damage to touch a $375 barrier this Monday, November 25, just one day and one night before the firm's Q3 earnings. Apparently, a rehabilitation period is progressing normally, as the stock initially fell only 3% to 6% in after-hours following the release and then kept within this frame of losses when the regular trading resumed on Wednesday. This looks like a worthy answer in the given circumstances.
Going back to fundamentals, CrowdStrike's financial performance consists of a 32% increase in its annual recurring revenue (ARR) which came out at $3.86 billion to exceed its inner preliminary guidance by a total of $0.964 billion. The firm's agreeable commitment to transparency and customer trust helps a lot, so that the company's long-term goal of reaching $10 billion in ARR by the fiscal year of 2031 could be a rather realistic and potentially achievable business targeting. Particularly for the recent quarter, CrowdStrike sales climbed by 29% to $1.01 billion to generate an EPS (equity per share) of $0.93 instead of $0.81 cents in consensus estimates. The Q3 profit number was exactly at the company's Q1 level, which was the second best quarterly result before the incident. CrowdStrike estimated its current quarter revenue to be between $1.03 billion and $1.04 billion, with a supposed annual adjusted EPS from $3.74 to $3.76, up from a previously forecasted range of $3.61 to $3.65.
From our point of view, these bare facts may confirm that CrowdStrike quickly cured its fresh wounds. Yet, this does not mean that an immediate price increase should be expected. Our baseline scenario after the quarterly report suggest that a retest of some lower area, let's say between $315 and $330 per share, would be desirable to attract more picking up investment power. We generally agree with Citigroup estimates which maintained a Buy rating on CrowdStrike and raised their price target to $400 from the previous $300, though mentioning impacts from Chinese cyber competition and extended sales cycles after the outage, but we could project such a target with a caveat of high chance of touching lower levels first, before the next wave of price recovery would be formed.
"Our single platform approach and trailblazing innovation continue to resonate at-scale,” CEO George Kurtz commented on better-than-feared results. "While the outage impact is still in play, Flex and financial services (CFS) are driving greater module adoption, larger deal sizes, and longer duration contracts... with customers opting for more modules vs. extended deal terms as part of the Customer Commitment Package (CPP)", Oppenheimer analysts noted, suggesting a likely recovery in the second half of 2026. "Hyper-growth modules in Cloud Security, Identity Protection, and Log Scale collectively surpassed $1 billion in ARR", according to conference call papers presented by CrowdStrike. Back to Citigroup analysis, they also feel offerings like FalconFlex end-to-end fleet management system to improve logistics and delivery and CrowdStrike Falcon Spotlight (CFS), which is a dynamic vulnerability management solution equipped with intuitive dashboards and filtering capabilities, will have a positive strategic impact on retention, expansion, competitive positioning, average selling price, and market consolidation. City also sees the growth pace of bookings in remaining performance obligations at approximately 70% YoY.
