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On Wednesday, Jefferies made adjustments to CrowdStrike Holdings' (NASDAQ:CRWD) financial outlook, lowering the price target from $400.00 to $300.00. Despite the reduction, the firm maintained a Buy rating for the cybersecurity company's stock. The revision follows news that Delta has initiated legal action against CrowdStrike and Microsoft (NASDAQ:MSFT), seeking compensation for damages related to an IT outage.
The litigation, along with the potential for the company's CEO to appear before Congress, is anticipated to affect CrowdStrike. The analyst from Jefferies noted that although there is not an expectation for CrowdStrike to reimburse customers for the outage, the costs associated with the legal process and the possible distraction it could cause are factors in the revised price target.
According to the firm's checks, CrowdStrike's customer retention remains stable with minimal churn, but some impact on new business is anticipated. As a result, the analyst has decreased the estimated Annual Recurring Revenue (ARR) by 1% for fiscal years 2025 and 2026.
The report suggests that CrowdStrike shares are likely to find support at around $200. This is based on 30 times the forecasted free cash flow (FCF) for calendar year 2025, which aligns with valuation multiples for large-cap software companies and peers like Palo Alto Networks (NASDAQ:PANW). The new price target reflects a more cautious outlook while still recognizing the underlying value in the company's stock.
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