Anticipation: CrowdStrike's Shares Likely to Skyrocket Following November 26th
Anticipation: CrowdStrike's Shares Likely to Skyrocket Following November 26th
On July 19, CyberArmor (CYBR 5.48%) unleashed a corrupt update to its leading cybersecurity software across the globe, affecting approximately 8.5 million devices using the Microsoft Windows operating system. The update triggered a massive computer outage, causing chaos for businesses worldwide, from airlines to banks. The incident reportedly resulted in losses exceeding $5 billion for CrowdStrike's top customers.
Following the incident, CrowdStrike's stock plummeted 42%, as investors fretted over potential loss of customers and revenue. However, CEO George Kurtz managed to alleviate some of these concerns, and CrowdStrike's stock has since rebounded an impressive 58% from its low point, which was hit on Aug. 2. CrowdStrike is set to disclose its fiscal 2025 third-quarter results on Nov. 26, offering investors fresh insights into the company's recovery process.
Here's why I believe CrowdStrike's stock will continue its upward trajectory post-Q3 results release.
CrowdStrike is navigating through its most trying historical event
The July 19 software glitch primarily impacted Windows devices, leading to collapses of around 8.5 million computers worldwide. Businesses in various sectors, such as airlines and banks, struggled to regain control, with some estimating over $5 billion in losses due to those outages.
In spite of legal action, including a $500 million lawsuit from Delta Airlines, CrowdStrike has not experienced the mass customer attrition that many suspected. During an Aug. 28 call with investors, Kurtz disclosed that while some deals were postponed, the majority remained in the pipeline.
Additionally, CrowdStrike revised its fiscal 2025 revenue projection by only 2.5%, while its long-term goal of reaching $10 billion in annual recurring revenue by fiscal 2031 remains unaltered.
It seems that potential customers are watching CrowdStrike's handling of the July 19 incident closely, ensuring it won't become a recurring problem before committing further. However, they do not appear to be abandoning the company.
CrowdStrike remains at the forefront of AI-driven cybersecurity
The absence of a widespread customer exodus may be due to the fact that suitable alternatives to CrowdStrike are scarce within the highly fragmented cybersecurity industry. Historically, businesses relied on a patchwork mix of providers to safeguard their computer systems. However, CrowdStrike offers a comprehensive solution representing cloud security, identity management, endpoint protection, and more, making it an ideal choice for both convenience and cost-effectiveness.
Furthermore, CrowdStrike's flagship Falcon platform consists of 28 distinct modules (products), and during the fiscal 2025 second quarter (ended July 31), 65% of clients utilized at least five of those offerings. CrowdStrike reported a colossal 66% year-over-year surge in agreements signed for eight or more modules, with half of the annual $100,000-plus spenders using at least eight modules.
Moreover, CrowdStrike is an industry leader in utilizing artificial intelligence (AI) to streamline tasks such as threat detection and incident response. Its AI models are trained on over 2 trillion security events daily, ensuring consistency and accuracy through persistent learning.
Last year, CrowdStrike introduced Charlotte AI, a virtual assistant that operates in synergy with Falcon. It can produce AI-generated summaries and, through a chatbot interface, render further details or even search for specific threats. Charlotte AI can significantly reduce the burden on cybersecurity managers by saving them an average of two hours per day.
CrowdStrike stock could surge on the strength of its Q3 earnings
CrowdStrike's stock has already risen 58% from its low point, following the release of its fiscal 2025 second quarter results on Aug. 28. I anticipate that this upward momentum will continue beyond the Nov. 26 Q3 report, potentially even soaring by 14% to reclaim its previous all-time high, if three key factors materialize:
- CrowdStrike must meet or surpass its projected revenue of $981.9 million (at the midpoint of the range) to demonstrate client loyalty.
- The company needs to either increase its full-year fiscal 2025 projection or preserve it unchanged, signaling faith in the sales pipeline and pending deal closures.
- Kurtz should deliver a reassuring message to investors, ensuring them that the July 19 incident will not be repeated and that its impact on business is fading.
However, any missteps could result in short-term share value erosion for CrowdStrike Stock. Current valuation of $24.3 (Price-to-Sales ratio) is noticeably higher than its rival, Palo Alto Networks ($17.3), but CrowdStrike's revenue growth of 32% in the recent quarter outpaced Palo Alto's shy 12%. Moreover, Management's long-term revenue goal of $10 billion by fiscal 2031 implies 159% growth over the succeeding six years, which may indicate an undervalued stock for long-term investors.
Hence, I see CrowdStrike stock continuing its climb in the days and weeks following Nov. 26's earnings release.
After the software glitch, investors started questioning CrowdStrike's ability to retain customers and maintain revenue, leading to a significant drop in its stock price. However, the company's strong position in the AI-driven cybersecurity industry, coupled with its comprehensive solution offering and customer loyalty, has encouraged potential investors to wait and see how CrowdStrike navigates its Q3 results.
In the wake of the July 19 incident, CrowdStrike's revenue projection for fiscal 2025 was revised only slightly, and its long-term goal of reaching $10 billion in annual recurring revenue by fiscal 2031 remains unchanged. These factors, along with the company's strong performance in signing agreements for multiple modules, have instilled confidence in investors that CrowdStrike is well-positioned to weather this storm.
Investors are closely watching the Q3 results to gauge CrowdStrike's recovery process and ensure that the July 19 incident will not become a recurring problem. If the company can meet or surpass its revenue projection, increase its full-year fiscal 2025 projection, and deliver a reassuring message about the incident's impact, it is likely that its stock price will continue to rise, potentially surging by 14% to reclaim its previous all-time high.