CrowdStrike stock remains a long-term buy, despite near-term challenges

On Monday, Barclays reaffirmed its Overweight rating and $285.00 price target for CrowdStrike Holdings (NASDAQ:) stock, a leader in the cybersecurity space. The firm’s perspective comes in the wake of an outage that affected CrowdStrike’s services, acknowledging the need for the company to project humility and reassurance during its first earnings call since the incident.

For the second quarter of fiscal 2025, Barclays has adjusted its expectations for CrowdStrike’s net new Annual Recurring Revenue (ARR) to $149 million. This estimate accounts for the outage’s impact during the final two weeks of the quarter, traditionally a peak period for business.

Despite the adjustment, the firm suggests that the quarter’s results may not fully reflect the outage’s impact, which is expected to be more pronounced in the second half of the fiscal year.

Barclays also referenced a scenario analysis that includes a downside scenario, which anticipates a 50% year-over-year decrease in net new ARR for the second half of fiscal 2025. The scenario also projects 35% Free Cash Flow (FCF) margins in fiscal year 2027 and applies a 25x FCF multiple, arriving at a downside stock price of $215.

The analyst emphasized the importance of looking beyond the immediate effects of the outage. Despite the near-term challenges, they highlighted the increasing volume and severity of cybersecurity breaches and CrowdStrike’s reputation as a superior tool in preventing such breaches. This long-term perspective supports the firm’s view of CrowdStrike as an attractive investment within the cybersecurity industry.

In other recent news, CrowdStrike Holdings has been the subject of several adjustments by analyst firms. Bernstein SocGen Group cut its target for CrowdStrike shares to $315 from $381, while maintaining an Outperform rating. BMO Capital Markets followed suit, lowering its target from $410 to $290, citing a decrease in the expected net new Annual Recurring Revenue (ARR) for fiscal year 2025 by approximately $460 million.

Scotiabank also adjusted its outlook, decreasing the price target to $265 and maintaining a Sector Perform rating. Citi, DA Davidson, and Piper Sandler revised their outlooks, with Citi and DA Davidson reducing their price targets to $300 and $290 respectively, while Piper Sandler upgraded its rating to Overweight despite a lower price target of $290.

These adjustments follow a significant global outage and potential legal repercussions, including a class-action lawsuit filed by shareholders. Alphabet (NASDAQ:) Inc. has also significantly reduced its stake in CrowdStrike, as disclosed in a recent Securities and Exchange Commission filing.

Despite these challenges, analysts remain optimistic about CrowdStrike’s ability to recover, citing the company’s proactive response to the outage and acknowledgment of the incident as a rare event. These are among the recent developments surrounding CrowdStrike.

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