Predicting the future price of CrowdStrike's stock after a year is a speculative undertaking.
This year has been eventful for cybersecurity powerhouse CrowdStrike (CRWD shedding 0.22%). The company's stock soared to new heights early on, only to be tarnished by a significant outage, casting shadows over both the company and its stock.
Yet, CrowdStrike swiftly acknowledged its mistake and worked on a solution immediately after the outage. The company's stock has since climbed back from its recent lows. However, this recovery could make the stock more volatile, prompting investors to ponder how much more the CrowdStrike stock can climb in the upcoming year.
CrowdStrike's current state
CrowdStrike is renowned for its leading role in endpoint protection cybersecurity, with many clients relying on the company to safeguard devices such as smartphones, PCs, and servers.
Moreover, customers have increasingly opted for purchasing all their cybersecurity solutions from a single provider. CrowdStrike's reputation managed to win over a substantial number of clients, with 65% subscribing to at least five security modules from the company before the outage.
The swift admission of error and quick delivery of a fix likely saved its reputation, as there's been no indications of a mass exodus of customers.
In fact, Delta Air Lines recently filed a lawsuit against CrowdStrike, citing the fallout from the outage. According to risk and reinsurance expert Guy Carpenter, the financial repercussions could range from $300 million to $1 billion. However, CrowdStrike's insurers should cover most of these costs, minimizing the financial impact on the company.
Additionally, CrowdStrike's efforts to regain investor trust also helped its stock. Despite dipping around 48%, CrowdStrike's stock is now down roughly 25% from its pre-outage high during the summer.
Ongoing obstacles
Investors have been left in the dark regarding the exact consequences of the incident. The July 19 outage occurred at the end of the second quarter of fiscal 2025 (which concluded on July 31). Consequently, investors will have to wait till the Nov. 26 earnings report for fiscal Q3 to get a glimpse into the financial implications.
Furthermore, CrowdStrike's revenue growth had already started to slow down. In the second quarter of fiscal 2025, revenue hit $964 million, marking a 32% increase. In comparison, the revenue growth in the year-ago quarter was a more impressive 37%.
Looking ahead to fiscal Q3, CrowdStrike predicted a year-on-year revenue growth of just 25%.
Analysts at Fortune Business Insights forecast a compound annual growth rate (CAGR) of 14% for the cybersecurity industry through 2032. This suggests that CrowdStrike's growth should outperform industry averages. However, if the monetary burden from the outage is higher than anticipated, it could negatively impact the stock price.
That could also lead investors to scrutinize CrowdStrike's valuation, specifically its P/S ratio. Before the outage, the P/S ratio was around 30, but it has since dropped to 21. Comparatively, competitors like Zscaler and Palo Alto Networks trade at 13 times and 16 times sales, respectively. This disparity could cause investors to wonder whether CrowdStrike stock deserves its premium.
CrowdStrike's future prospects
Although CrowdStrike appears to be a long-term success story, its investors grapple with uncertainty over the next year.
Indeed, CrowdStrike benefits from thriving in a key segment of a rapidly expanding industry, and it is likely to remain a market-beating asset over an extended period. In the immediate aftermath of the July 19 outage, customers continued to subscribe to the company's security modules in significant numbers.
However, despite its insurance protecting most of the costs linked to the outage, the company has yet to disclose financial data concerning the incident, leaving investors struggling to gauge the impact. Moreover, with revenue starting to decline before the outage, investors may question the stock's value, given its inflated valuation. As a result, predicting the stock's short-term performance becomes challenging.
Taking these challenges into account, it's probably not advisable to invest in CrowdStrike stock if a short-term perspective is in focus.
Despite the ongoing legal battle with Delta Air Lines, CrowdStrike is exploring opportunities to diversify its finance portfolio. The company is considering investing in emerging cybersecurity technologies to strengthen its position in the industry. This strategic move could potentially yield high returns in the long run, appealing to investors looking for promising investment opportunities.
Moreover, the slowdown in CrowdStrike's revenue growth has sparked interest in analyzing its financial strategies. As investors evaluate the company's valuation, they might consider the potential benefits of investing in CrowdStrike for the long term, attributing its premium P/S ratio to its market-leading position and strong growth prospects in the cybersecurity industry.
