- Cybersecurity stock CrowdStrike (NDAQ:CRWD) has given back 23.1 per cent since a faulty software update deployed on Friday caused Microsoft Windows to crash on 8.5 million computers around the world
- Should you try and catch a falling knife and buy the dip, at the risk of further losses materializing over the near future?
- CrowdStrike is a global cybersecurity leader protecting critical areas of business risk
- CrowdStrike stock has added 76.45 per cent year-over-year and 311.82 per cent since inception in 2019
Cybersecurity stock CrowdStrike (NASDAQ:CRWD) has given back 23.1 per cent since a faulty software update deployed on Friday caused Microsoft Windows to crash on 8.5 million computers around the world.
The incident, caused by defective code, has led to thousands of flight cancellations, hospital and banking service interruptions, as well as internal system failures at schools, government agencies and 911 emergency services, with estimates of total losses at US$1 billion and counting.
The company has since deployed a fix as it continues to work with its high-profile clientele – including Delta Airlines, Visa, Amazon, The United States Department of Homeland Security, and The United Kingdom’s National Health Service – to get their systems back up and running.
The relevant question for investors during downward-spiral scenarios like CrowdStrike’s is whether to try and catch a falling knife and buy the dip, at the risk of further losses materializing over the near future. For five-year money, the case for opening a risk-adjusted position is a compelling one.
The defective code at the heart of the ongoing global outage is defined as “kernel-level,” meaning it impacted hardware and software communication at the most fundamental level. Failing to identify the defect before the update’s release points to a lax approval process, as opposed to a deeper, systemic issue, and should be rectified moving forward by the addition of redundancies such as smaller-scale tests.
Though media scrutiny has been negative and lawsuits are pouring in that may affect short-term cash flow, CrowdStrike serves 62 out of the Fortune 100 companies and retains positive analyst outlooks from Guggenheim Securities and Goldman Sachs who believe the stock will recover over a multi-year time horizon. Their view is supported by:
- CrowdStrike turning profitable in fiscal 2024, taking in US$89.33 million, including increasing profitability over the past five quarters.
- Revenue growth of 6.23x from US$481.41 million in fiscal 2020 to US$3.05 billion in fiscal 2024.
- Guidance for fiscal 2025 of up to US$4.01 billion in revenue and up to US$1.01 billion in net income, the latter representing a more than 10x jump year-over-year.
Readers interested in building a position in CrowdStrike should continue their due diligence by reading its latest investor presentation, and stagger their investment over the coming days to average out exposure to the stock’s volatility.
About CrowdStrike
CrowdStrike is a global cybersecurity leader protecting critical areas of business risk.
CrowdStrike stock (NASDAQ:CRWD) is down by 13.36 per cent, trading at US$264.22 per share as of 1:42 pm ET. The stock has added 76.45 per cent year-over-year and 311.82 per cent since inception in 2019.
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(Top image of CrowdStrike’s main office in Silicon Valley, California: CrowdStrike)