Shares of CrowdStrike Holdings Inc CRWD hit 52-week lows on Wednesday, even as the company reported better-than-expected results.
- BofA Securities analyst Jonathan Eisenson reiterated a Buy rating; reduced the price target from $220 to $177.
- Truist Securities analyst Joel Fishbein maintained a Buy rating; reduced the price target from $275 to $200.
- Stephens analyst Brian Colley reaffirmed an Overweight rating; cut the price target from $205 to $161.
- Mizuho Securities analyst Gregg Moskowitz reiterated a Buy rating; reduced the price target from $205 to $175.
- JMP Securities analyst Trevor Walsh maintained a Market Outperform rating; lowered the price target from $275 to $235.
- RBC Capital Markets analyst Matthew Hedberg reaffirmed an Outperform rating; reduced the price target from $200 to $165.
- Cantor Fitzgerald analyst Jonathan Ruykhaver reiterated an Overweight rating; slashed the price target from $240 to $160.
- “Revenues/EPS beat expectations, though the focal point was the longer sales cycle at smaller customers and worsening subscription start dates at larger enterprises, which drove weaker ARR,” Eisenson said in a note.
- There are “multiple areas of potential weakness,” the analyst stated. Estimates had been lowered “to reflect the tougher environment.”
- “CRWD delivered better than expected revenue, operating income, and FCF for its 3Q23, however, ARR and net new ARR were below our expectations due to increased macro headwinds,” Fishbein said.
- “CRWD wasn't immune to macro pressures as management called out deal cycles being elongated, and some larger customers pursuing multi-phase subscription start dates, delaying ARR recognition,” he added.
- Management lowered their sales guidance for the fiscal fourth quarter to 2% below consensus, “and provided FY24 guidance for low-30%s ARR growth (vs. consensus +36%) and 30% FCF margins (assuming current macro headwinds continue),” Colley said in a note.
- He added, however, that the underlying demand for CrowdStrike’s solutions remains strong and the “vast majority of the 3Q shortfall is simply from deals getting delayed/deferred into future quarters vs. lost.”
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- The company’s quarterly results were “disappointing,” Moskowitz stated. “ARR growth of 54% Y/Y was slightly below the Street's 55% forecast, and more meaningfully missed buy-side expectations."
- “While we're certainly disappointed by these results, we believe CRWD’s cloud platform remains highly differentiated, its GTM is unrivaled, we're still confident the co. can very successfully extend beyond traditional endpoint security markets, and FCF margins remain ~30%,” the analyst added.
- “Despite broad-based macroeconomic pressures impacting all corners of the market,” CrowdStrike has some positives, including its cloud-native platform, which “enables the company to quickly expand into new areas of cybersecurity, leading to a company-calculated TAM of $126 billion by 2025,” Walsh mentioned.
- CrowdStrike is “well-positioned to address trending XDR and cloud security market opportunities,” given its “wide portfolio, thoughtful technology partnerships, and prior acquisition of Humio for log management capabilities and Reposify for External Attack Surface Management,” he added.
RBC Capital Markets
- “The quarter was mixed as ARR saw macro headwinds from SMB deals pushing and phased enterprise deals equating to a $25M net-new ARR headwind vs. Q2/23,” Hedberg said in a note.
- “Despite the smaller scale of the revenue beat, profitability remained strong, with both of these themes carrying into Q4 guidance where management is prudently assuming the macro gets worse, a more cautious view than peers,” he added.
- “We believe no deals were lost and are still in the pipeline, but the timing of closure has shifted,” Ruykhaver stated.
- “As a result of the resetting of expectations, we believe CRWD's strength should continue toward finishing FY23 with a higher module adoption rate; meanwhile, we will watch for new developments in the nascent cloud security, identity, and security operations journey,” he added.
CRWD Price Action: Shares of CrowdStrike had declined by 18.57% to $112.38 at the time of publication Wednesday.
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