After rising almost 10% in the past week, shares of CrowdStrike (NASDAQ:CRWD) have continued their ascent higher today. The 3% surge investors are seeing in CRWD stock this afternoon is notable because it comes on the heels of a major price target cut by analysts at DA Davidson.
In fact, these analysts cut their price target on CrowdStrike by a whopping 23%, suggesting that CrowdStrike’s recent outage represents a more considerable headwind than the market may be factoring in. Indeed, this outage caused “significant disruptions to the business operations of thousands of customers,” something DA Davidson believes could prompt many of the company’s customers to seek out alternative cybersecurity providers.
That’s a thesis that certainly makes sense. But today’s price action suggests many in the market may feel as though these concerns are already baked into the company’s stock price, given that CRWD stock is down around 35% from pre-outage levels.
CRWD Stock Higher, Despite Analyst Downgrade Today
The stock market can be such an effective pricing mechanism that analysts can often find themselves behind the curve. Today’s downgrade from analysts at DA Davidson does appear to reflect a reactive downgrade, with the analysts still retaining a $290 price target on the company (down from $380 previously). If CrowdStrike hits this target over the next year, that could imply an upside of around 14% from current levels. So, it’s not all bad.
Of course, the rather scathing note reflects the sentiment many other analysts have espoused in recent weeks. The kind of outage that CrowdStrike was responsible for isn’t acceptable, and its recent stock price plunge reflects the markets’ feelings on this topic as well.
I’m not sure exactly what the ultimate impact of this outage will be on customers’ willingness to switch to other providers just yet. I have heard rumblings among some companies that may be looking to explore their options. But if CrowdStrike can lock things down and sort out its upgrade processes, this stock may look like a steal in hindsight at current levels. We’ll just have to see.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
Analysis:
CrowdStrike (CRWD) stock has seen a surge despite a 23% price target cut by analysts at DA Davidson. This downgrade reflects concerns about the recent outage affecting thousands of customers. However, the market seems to have already priced in these concerns, with CRWD stock down 35% from pre-outage levels. While some customers may consider alternative providers, if CrowdStrike can address its issues, the stock may present a buying opportunity with a potential upside of 14% to reach the $290 price target. Investors should monitor developments in CrowdStrike’s operations to assess future potential.