Analyst: Microsoft ‘Unlikely to Cut’ Crowdstrike Holdings (NASDAQ:CRWD) Off
We recently published a list of 10 Trending AI Stocks in October. Since Crowdstrike Holdings Inc (NASDAQ:CRWD) ranks 8th on the list, it deserves a deeper look.
Tom Lee, Fundstrat co-founder, while talking to CNBC in a latest program, explained his bullish case for the market and why he believes the S&P 500 is headed to close the year “well beyond” 5,700.
“Bull markets are supported by a strong fundamentals and this is a case where not only has the economy survivie extremely high interest rates but the Fed is beginning to cut rates, and an economy that has been sort of languishing has been China. Now we have stimulus and what looks like some bazooka policies that are supporting that region, and we have a lot of cash on the sidelines. I think this is a formula for stocks to do pretty well the next three to 12 months, and that’s why we think that we would be well beyond 5700 before year-end.”
Lee said that he’s inclined to buy “risks outright” as he believes more upward momentum would come for stocks after the election.
“Small caps still have good fundamentals, earnings growth is accelerating, the media P/E is eleven times which is almost seven turns lower than the S&P so I think there is still case to be made that small-cap are starting a multi-year gain.”
For this article we picked 10 AI stocks that are making big moves on the back of latest news. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Crowdstrike Holdings Inc (NASDAQ:CRWD)
Number of Hedge Fund Investors: 69
Crowdstrike Holdings Inc (NASDAQ:CRWD) seems to be recovering from the widespread outage experienced in July, with analysts from TD Cowen noting that significant customer churn is not anticipated and that Microsoft (NASDAQ: MSFT) is unlikely to sever ties with the cybersecurity firm.
In a recent note, TD Cowen analysts led by Shaul Eyal emphasized, “We reiterate our view that MSFT is unlikely to cut Crowdstrike Holdings Inc (NASDAQ:CRWD) off from accessing telemetry data out of the kernel given the mission criticality of the Falcon EDR platform product, which is deployed at over 29,000 customers, including 70% of the Fortune 100.” They observed that there does not appear to be significant near-term churn, as customers do not seem to be leaving in the wake of the July outage.
Eyal added that a more accurate assessment of revenue uplift potential will require patience over the next two quarters, allowing management to gain sufficient visibility into the Falcon Flex renewal pipeline. TD Cowen maintains its Buy rating on Crowdstrike Holdings Inc (NASDAQ:CRWD) stock with a price target of $380.
Despite the tech outage incident, the fundamental story of Crowdstrike Holdings Inc (NASDAQ:CRWD) remains unchanged. Wedbush Securities estimates that less than 5% of CrowdStrike’s customers might switch providers, potentially impacting revenue by $150 million out of the projected $3 billion in sales for fiscal year 2024. This would lower the company’s forward revenue growth from 30.6% to 25.6%, but even at this adjusted rate, Crowdstrike Holdings Inc (NASDAQ:CRWD) would remain well above the IT sector median.
TimesSquare Capital Management U.S. Focus Growth Strategy stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q2 2024 investor letter:
“Our cybersecurity holdings were also beneficial to the strategy this quarter. That included the 20% gain from CrowdStrike Holdings, Inc. (NASDAQ:CRWD), a cloud-based network security service provider that supports a range of devices, endpoints, and cloud environments. CrowdStrike’s revenues and earnings exceeded expectations, with 33% growth in annual recurring revenue. CrowdStrike continues to see growing momentum in emerging areas such as Cloud Security, Identity, and Security Information & Event Management where it is displacing legacy providers. That led CrowdStrike’s management to increase its guidance for revenues and earnings for the balance of its fiscal year.”
Overall, Crowdstrike Holdings Inc (NASDAQ:CRWD) ranks 8th on Insider Monkey’s list titled 10 Trending AI Stocks in October. While we acknowledge the potential of Crowdstrike Holdings Inc (NASDAQ:CRWD), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRWD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.