Scotiabank has adjusted its outlook on CrowdStrike Holdings (NASDAQ: NASDAQ:CRWD), decreasing the price target to $265 from the prior $300 while keeping a Sector Perform rating on the stock.
The change comes in the wake of a global outage involving CrowdStrike and Windows that prompted the firm to re-evaluate the cybersecurity company's prospects.
The price target revision was informed by conversations with four large CrowdStrike customers, each with significant annual expenditures, including one that spends over $10 million.
Additionally, insights were gathered from three seasoned lawyers and a cybersecurity insurance expert to gauge the fallout from the recent outage. The majority of customers, who experienced minimal to moderate impact, seem unlikely to seek concessions from CrowdStrike.
However, those severely affected financially might turn to their cybersecurity insurance and could negotiate with CrowdStrike for service credits or complimentary services.
The fieldwork suggests that legal action against CrowdStrike is considered a last resort for customers facing outage-related losses. Despite the perceived risks to CrowdStrike's forward-looking annual recurring revenue (ARR) for fiscal years 2025-2026, the analysts see less likelihood of legal expenses affecting free cash flow (FCF) projections for the same period.
The report concludes with a recognition of CrowdStrike's stature in the software industry, describing it as one of the greatest companies in its field. Nonetheless, Scotiabank anticipates that the company's shares might underperform in the year 2024, prompting the maintained Sector Perform rating despite the lowered price target.
Meanwhile, analyst firms Citi, DA Davidson, and Piper Sandler have all adjusted their outlook on CrowdStrike following a significant global IT outage. Citi lowered its price target from $345 to $300, while maintaining a Buy rating. DA Davidson also reduced its price target to $290 from $380 but kept its Buy rating. Piper Sandler upgraded CrowdStrike's rating from Neutral to Overweight, despite lowering the price target to $290 from $310.
In the wake of the outage, CrowdStrike has been dealing with potential legal repercussions and discussions with partners regarding the incident's aftermath. A class-action lawsuit has been filed by shareholders over the disruption. Alphabet (NASDAQ:GOOGL) Inc. has also reduced its stake in CrowdStrike by nearly half, according to a Securities and Exchange Commission filing.
Despite these challenges, analysts remain optimistic about CrowdStrike's ability to recover. The company's proactive response to the outage and acknowledgment of the incident as a rare event has been noted.
InvestingPro Insights
In light of Scotiabank's recent adjustment of CrowdStrike's price target, it's valuable to consider key metrics and insights provided by InvestingPro. CrowdStrike Holdings (NASDAQ:CRWD) currently holds a market capitalization of $60.38 billion, reflecting its significant presence in the cybersecurity space. Despite recent challenges, the company boasts a robust revenue growth of 34.26% over the last twelve months as of Q1 2025. This growth is complemented by a gross profit margin of 75.29%, indicating strong underlying business efficiency.
InvestingPro Tips suggest that CrowdStrike holds more cash than debt on its balance sheet, which could provide financial stability and flexibility in navigating current market conditions. Additionally, analysts predict that the company will be profitable this year, which aligns with the positive revenue growth and gross profit margin data. However, it's worth noting that CrowdStrike is trading at a high earnings multiple, with a P/E ratio of 453.25, signaling a premium valuation that investors are willing to pay for its growth prospects.
For investors seeking a deeper dive into CrowdStrike's performance and future outlook, there are over 15 additional InvestingPro Tips available at: https://www.investing.com/pro/CRWD. These insights could provide a more nuanced understanding of the company's position in the market and help inform investment decisions.
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