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Investing.com -- Piper Sandler downgraded CrowdStrike Holdings (NASDAQ:CRWD) to Neutral from Overweight, saying the cybersecurity firm’s rapid share-price gains have outpaced its earnings outlook and left little room for upside in the near term.
The brokerage said CrowdStrike’s stock, up roughly 60% in the past three months, is now trading above its $505 price target and at stretched valuation levels, over 21 times estimated out-year revenue and nearly 70 times projected free cash flow.
The company’s enterprise value has risen above $125 billion, it noted.
“We do not foresee a near-term scenario that would meaningfully increase numbers or our terminal multiple,” analysts wrote, adding that CrowdStrike already trades at the highest multiple across Piper’s software coverage.
While maintaining a positive long-term view on the company’s role as a security and IT platform consolidator, Piper said slowing momentum in some core areas, uncertainty in federal spending, and recent organizational changes add near-term risks.
The firm cited the impact of a recent workforce reduction, as well as an ongoing SEC and DOJ investigation related to Carahsoft contracts.
The downgrade marks a repeat of Piper’s July 2024 call, when it also lowered its rating on valuation concerns shortly before a global outage that affected some customer operations.
Although management has since addressed the disruption, Piper said it still sees lingering effects and has reduced its growth expectations.
The firm kept its $505 price target unchanged, saying it does not expect to raise either its forecasts or the multiple used in its valuation model.
CrowdStrike shares were down 2% at $503.85 on early trading on Monday.