Morgan Stanley Downgrades CrowdStrike Ahead of Q2 - Here's Why The Stock Is Falling

Morgan Stanley analyst Hamza Fodderwala downgraded CrowdStrike Holdings, Inc CRWD to Equal Weight from OverWeight with a price target of $167.

The analyst rerated ahead of the Q2 earnings, as he sees a downside to consensus CY23 and CY24 estimates, which assume a second-half re-acceleration in net new ARR. 

His cautious view reflects more recent checks and data points over the last month, citing a further slowdown in key industry verticals, cloud optimization headwinds, and limited upside to FCF margins. 

Bottom line, while he still prefers the name-long term and the valuation is not demanding at 29X EV/CY24 FCF, he believes the risk-reward is more balanced here given the negative revisions risk and a likely gradual demand recovery. 

Wells Fargo analyst Andrew Nowinski reiterated OverWeight and raised the price target from $175 to $200.

He believes the setup in the print looks appealing and expects CrowdStrike to report a net new ARR of $200 million, which should be good enough. 

The price target reflects an EV/Sales multiple of 12.0x his CY24E estimates. 

The target multiple is a modest premium to the peer group average of 11.0x, justified due to higher revenue growth assumptions (29% in CY24 vs. 26% for the peer group average).

Price Action: CRWD shares traded lower by 4.48% at $142.88 on the last check Monday.