Is CrowdStrike Stock Going to $324? 1 Wall Street Analyst Thinks So.
This year has been filled with ups and downs for cybersecurity company CrowdStrike (NASDAQ: CRWD) and its shareholders.
From Jan. 1 through July 18, CrowdStrike stock gained 34% -- absolutely trouncing the S&P 500 and Nasdaq Composite. Just a few weeks prior, it had climbed to a fresh all-time high of $398.33 per share.
But on July 19, everything changed. A bug found in one of CrowdStrike's software updates caused widespread outages across its platform. As a result, 8.5 million systems running on CrowdStrike's cybersecurity protocols were impacted, and the stock started cratering in spectacular fashion.
Since news of the outage broke on July 19, shares of CrowdStrike have rebounded to some degree, but they're still down over 25% from their summer peak.
And yet, even with the reputational damage stemming from the incident and volatile trading for CrowdStrike stock, Goldman Sachs equity research analyst Gabriela Borges recently raised their price target for the company from $295 to $324 -- implying 11% upside from current levels.
Let's dig into the full picture at CrowdStrike and assess if now is a good time to load up on the stock.
Thinking big picture
One thing to know about the stock market is that buying and selling activity is often disconnected from the underlying fundamentals of company. Investors often allow the story around a stock take precedence over the quality of its business.
This disconnect is usually on full display during periods of extreme volatility such as black swan events, including CrowdStrike's widespread outage.
Not too long ago, I wrote a piece about recession-proof companies and highlighted how Microsoft's business grew exponentially during the Great Recession, and how demand for CrowdStrike's cybersecurity offerings took off during the COVID pandemic.
At the time, you may have believed the Great Recession and pandemic were appropriate times to sell growth stocks. But think about it from another perspective: Both Microsoft and CrowdStrike provide services and products that businesses need -- regardless of the state of the economy.
Although CrowdStrike's recent outage was jarring, the company's tens of thousands of subscribers are unlikely to cancel their contracts and switch to other vendors en masse.
How can CrowdStrike bounce back?
That's not to say the company will see zero consequences stemming from the incident. During CrowdStrike's earnings call in late August, management explained that it's implementing a retention strategy revolving around "customer commitment packages." Naturally, these packages include features such as price discounts, flexible payment terms, and an emphasis on professional services to help better understand customer use cases.
The goal of these packages is to build more customer loyalty during an otherwise tumultuous time for the company. While CrowdStrike's near-term growth will be stunted to some degree, the long-term opportunities created by this effort have significant potential as well.
Based on early indications from CrowdStrike's post-outage earnings release, the company should ultimately retain the vast majority of its customers, while its new commitment strategy can nurture stronger customer relationships and strengthen brand equity.
Is CrowdStrike stock a buy right now?
Valuing CrowdStrike is tough. While the company is profitable, its net income is fairly small. This makes valuing the stock on a price-to-earnings (P/E) basis somewhat impractical.
The chart benchmarks CrowdStrike against a set of industry peers on a price-to-sales (P/S) basis.
CrowdStrike is the highest-valued stock in this cohort on a P/S basis, despite its sell-off since July.
Like Borges, I agree that better days are ahead for CrowdStrike. Cybersecurity is a product that will continue witnessing strong secular tailwinds for many years, and the company is taking the right steps to maintain its leadership position in the marketplace. Now can be a good time to take advantage of the sell-off, but with the uncertainty that exists in the near-term, investors should prepare to hold the stock for the long run.
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Adam Spatacco has positions in Microsoft. The Motley Fool has positions in and recommends CrowdStrike, Fortinet, Goldman Sachs Group, Microsoft, Okta, Palo Alto Networks, and Zscaler. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Is CrowdStrike Stock Going to $324? 1 Wall Street Analyst Thinks So. was originally published by The Motley Fool