CrowdStrike bulls are out in full force as stock slips: 'Things are still in very good shape'

By Emily Bary

Analysts are overwhelmingly bullish on CrowdStrike and aren't sweating the latest earnings report

CrowdStrike Holdings Inc. found its share of defenders Thursday even as the cybersecurity company's latest earnings report propelled its stock lower.

"We recommend investors take a step back and look at the big picture," SVB MoffettNathanson analyst Sterling Auty wrote, as shares of CrowdStrike (CRWD) dropped 4% in Thursday morning action.

See also:CrowdStrike stock drops after less-than-perfect earnings outlook

The company's results "looked good" to him, although the market seemed to be disappointed in CrowdStrike's net new annual recurring revenue (ARR) and billings growth, highlighting what Auty viewed as mismatched expectations despite prior commentary from management indicating that the first half of the fiscal year would be seasonally weaker in terms of net new ARR.

"Win rates and demand environment appear steady, and margins should expand through the year," he wrote. "Plus, CrowdStrike is improving their position in the public sector (federal government) and is well positioned to capitalize on AI in cybersecurity. Taken together we think things are still in very good shape for the stock."

Artificial intelligence "is about the data set and CrowdStrike has a good one," Auty continued, elaborating that the company "has over a decade of some of the best cybersecurity data in its threat graph all annotated with human actions and intelligence." He rates the stock at outperform, with a $217 target price.

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Evercore ISI's Peter Levine advised investors to tune out the "noise" coming out of the report.

"The core demand drivers of the business remain very healthy, net new ARR from $1m-plus customers grew [year over year], win rates remain unchanged, and [CrowdStrike] entered [the fiscal second quarter] with a record pipeline," he wrote, while sticking with an outperform rating and $190 target price. "We would also call out that the trend towards vendor consolidation is playing into [CrowdStrike's] favor as they closed over 50% more deals with eight or more modules compared to a year ago."

Guggenheim's John DiFucci weighed in that CrowdStrike "is one of the few companies in our coverage universe that had yet to show a decline in new ARR before this quarter, though growth has waned."

"We don't believe this detracts from the best-in-class characteristics of this company (further demonstrated in cash flow this quarter), but we consider this the result of broad macro softness, which we believe will continue for a prolonged period, though the market seems to have other ideas of late," he continued.

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DiFucci lifted his price target on the stock to $162 from $156, cheering CrowdStrike's "impressive free-cash-flow generation." He rates the stock a buy.

Stifel's Brad Reback, meanwhile, was more cautious, writing that CrowdStrike's view of net new ARR in the second half of the fiscal year "appears optimistic as organizations digest COVID-driven end-point purchases and [CrowdStrike] faces a more challenging competitive environment that could impact win rates and renewal pricing."

He has a hold rating on the stock, although he upped his price target to $128 from $125 after the Wednesday afternoon report.

Of the 43 analysts tracked by FactSet who cover CrowdStrike's stock, 37 have buy ratings and six have hold ratings, with an average price target of $173.46.

-Emily Bary

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06-01-23 1045ET

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