CrowdStrike Faces Downgrades Amid Concerns Over Pricing and Renewals Following Disruption

CrowdStrike Holdings, Inc CRWD stock continued its downward price trajectory Monday as its cloud software update on Thursday triggered an outage that affected businesses worldwide.

A failed update to CrowdStrike’s Falcon platform disrupted Microsoft Corp MSFT systems, halting critical global services, including airports, ports, financial institutions, and hospitals.

Microsoft said the outage affected less than 1% of Windows users globally, equating to 8.5 million machines.

Also Read: Goldman Sachs Analyst Stays Course On CrowdStrike Despite Outage, Expects Strong Company Reputation To Aid Recovery

Windows holds about 72% of the global operating system market share, while CrowdStrike commands nearly 24% in endpoint protection security.

Microsoft clarified that a prior agreement with the European Commission prevents it from adopting the same security measures as Apple Inc AAPL as it battled criticism.

Several analysts rerated Crowdstrike stock on Monday, voicing their mixed opinions on the prospects of the stock.

Guggenheim analyst John Difucci downgraded CrowdStrike from Buy to Neutral. BTIG analyst Gray Powell downgraded from Buy to Neutral.

Piper Sandler analyst Rob Owens maintained a Neutral and lowered the price target from $400 to $310.

Owens notes the CrowdStrike incident as relatively unprecedented. With the incident impacting airlines, hospitals, and 911 call centers, the analyst expects that speculation around litigation will remain for some time, alongside uncertainty around pricing, renewals, and new logo additions. The analyst projects second-quarter revenue and adjusted EPS of $961.2 million and $0.99.

Oppenheimer analyst Ittai Kidron reiterated an Outperform. Kidron removed CrowdStrike from his 2024 top picks. While the analyst remains positive about the long-term opportunity, he expects shares to face continued pressure near-term.  

Canaccord Genuity analyst Kingsley Crane reiterated a Buy and a $405 price target.

RBC Capital analyst Matthew Hedberg maintained an Outperform rating and a price target of $420, down from $380.  Hedberg expects CrowdStrike to emerge as a stronger cyber-security vendor as this was not a breach but rather a significant breakdown in process.

The analyst considers the outage a possible near-term overhang, which illustrates the interconnected nature of the ecosystem. Hedberg projects second-quarter revenue and adjusted EPS of $959.8 million and $0.99.

Truist Securities analyst Joel P. Fishbein Jr reiterated a Buy with a price target of $400. Fishbein Jr. notes that the outage and impact are a result of a faulty software update rather than a security breach.

The analyst expects the outage to be okay with the fundamental demand for the company’s security solutions. In the near term, it does dent the company’s stellar image, but Fishbein Jr. did not expect its competitors to take market share from CrowdStrike. He remains a buyer on weakness.

Scotia Bank analyst Patrick Colville downgraded to Sector Perform from Sector Outperform with a price target of $300, down from the prior $393.

Colville voiced a similar opinion as per Trusit analyst Fishbein Jr. Colville projects second-quarter revenue and adjusted EPS of $953.8 million and $0.99.

The stock plunged 30% in the last five days.

Price Action: CRWD shares traded lower by 12.8% at $265.74 at the last check on Monday.

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