On Friday, JPMorgan reiterated its Overweight rating on CrowdStrike Holdings (NASDAQ:CRWD) stock, increasing the price target to $369 from the previous $330. The firm anticipates that the cybersecurity company's upcoming earnings report, scheduled for November 26th at 5pm ET, may surpass some market expectations. This report marks the first complete quarter following the July 19th service outage.
CrowdStrike's third fiscal quarter results are expected to significantly reflect the impact of the sales hiatus resulting from the outage, as well as the effects of the Customer Commitment Packages (CCP) offered to clients. Last quarter, forecasts were substantially lowered, and the company set conservative guidance to manage performance expectations after the outage. JPMorgan predicts that this quarter will show the most strain on growth, margins, and cash flow, with a gradual improvement as time moves on from the incident.
Despite the recent challenges, discussions with partners and customers suggest robust customer retention and increased consolidation onto CrowdStrike's platform. Although it's early for definitive data on CCP adoption rates, indicators such as Remaining Performance Obligations (RPO) and attach rates could provide insights into the platform's long-term health.
Investors are believed to be looking beyond the current trough towards a recovery, with expectations that CrowdStrike may gain stronger market positioning and share as CCP initiatives wind down. JPMorgan acknowledges some risk of legal exposure due to the outage but anticipates that any potential impact will be limited by contracts or mitigated by the company's customer accommodations.
Customer feedback indicates confidence in the platform's reliability and the remediation of the issues that caused the outage. JPMorgan suggests that CrowdStrike's response to the incident positions it as a leading platform in Security Software (ETR:SOWGn). The analyst notes the company's pioneering status as a large, efficient cloud-native platform and sees additional growth potential, highlighting over $1 billion in Annual Recurring Revenue (ARR) from emerging products with an 85% year-over-year growth last quarter.
In conclusion, JPMorgan expects CrowdStrike to reaccelerate growth and profitability as it overcomes the outage's near-term challenges. The revised price target to $369 reflects a positive long-term outlook and recent market trends.
In other recent news, CrowdStrike Holdings has been receiving considerable attention due to several significant developments. Analyst firms Cantor Fitzgerald, Stifel, and Truist Securities have all increased their price targets for CrowdStrike, maintaining positive ratings. Cantor Fitzgerald emphasized the expected broader adoption of CrowdStrike's platform, lower-than-anticipated customer churn rates, and potential for accelerated Annual Recurring Revenue.
Stifel, preparing for CrowdStrike's third-quarter fiscal year 2025 earnings report, highlighted diminishing impacts from a previous faulty update and increasing confidence in the company's medium-term market opportunities. Truist Securities, also anticipating the Q3 report, raised the price target based on CrowdStrike's ability to surpass market expectations despite a Global IT outage that deferred transactions.
Meanwhile, CrowdStrike faces a lawsuit from Delta Air Lines (NYSE:DAL) over a significant global outage attributed to a faulty update, which led to widespread flight cancellations and financial losses exceeding $500 million. Despite this, Wedbush Securities initiated coverage on CrowdStrike with an Outperform rating, highlighting the company's robust platform adoption and momentum in key areas. In addition, CrowdStrike has formed a strategic alliance with Plurilock Security Inc. to strengthen protection for critical infrastructure. These are among the recent developments surrounding CrowdStrike.
InvestingPro Insights
CrowdStrike's robust financial performance aligns with JPMorgan's optimistic outlook. According to InvestingPro data, the company's revenue growth remains strong at 33.07% over the last twelve months, with a healthy gross profit margin of 75.37%. This solid financial foundation supports the potential for continued growth and market share expansion that JPMorgan anticipates.
InvestingPro Tips highlight that CrowdStrike's net income is expected to grow this year, and analysts predict the company will be profitable. These projections reinforce JPMorgan's positive stance on the company's ability to overcome recent challenges and improve its financial position.
The stock's strong performance is evident in its 70.58% return over the past year and a 33.59% return over the last three months. This aligns with JPMorgan's increased price target and suggests investor confidence in CrowdStrike's long-term prospects.
For investors seeking a deeper understanding of CrowdStrike's potential, InvestingPro offers 16 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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