The cybersecurity stock of CrowdStrike Holdings witnessed a drop in value on Monday, following a downgrade by Morgan Stanley analyst Hamza Fodderwala. Fodderwala has adjusted his rating on CrowdStrike shares, lowering them from Overweight to Equal Weight. In addition, he revised his price target for the stock, reducing it from $178 to $167. Fodderwala cited a challenging demand environment as one of the reasons for the downgrade.
Of particular concern to Fodderwala is the potential slowdown in spending from large customers. Verticals that make up over 20% of the company’s total annual recurring revenue (ARR) are expected to proceed with caution and adopt phased deployments and smaller deal sizes. Fodderwala predicts an extended decline in cybersecurity spending, with the possibility of recovery not occurring until 2025.
In response to the downgrade, CrowdStrike has yet to provide a comment. Previously, Chief Executive George Kurtz emphasized the company’s strong growth and exceptional margins despite a challenging macro environment during an earnings call in May.
As a result of the news, CrowdStrike shares experienced a 3.1% drop on Monday, closing at $145.04. It is worth noting that the stock has still achieved a 38% climb in value throughout 2022.
While Fodderwala expressed caution, Piper Sandler analyst Rob Owens maintains a more positive outlook for CrowdStrike ahead of earnings, rating the stock as Overweight with a $180 price target. Owens believes the company’s fundamentals remain strong and expects the quarter’s performance and guidance to meet or exceed expectations.
RBC Capital Markets analyst Matthew Hedberg shares Owens’ bullish sentiment, rating the stock as Outperform with a $182 price target. Following positive company-specific checks, Hedberg anticipates slight outperformance in the results, along with higher revenue and profitability guidance for FY/24.
According to FactSet, 39 out of 46 analysts surveyed rate CrowdStrike stock as a Buy, while the remaining seven consider it a Hold. None of the surveyed analysts rate it as a Sell.