Shares of a troubled cybersecurity company Crowd strike (NASDAQ: CRWD) CrowdStrike stock fell Monday as Friday’s incident continues to be in the spotlight. Several analysts have downgraded their near-term expectations for the company, which may not be an overreaction. As of 10:15 a.m. ET, CrowdStrike shares were down 12% for the day and are now down more than 30% from their all-time high earlier this month.
Analysts downgrade CrowdStrike
CrowdStrike updated its cloud-based software on Friday. But the update had a defect which caused approximately 8.5 million Microsoft Windows devices will stop working, impacting financial institutions, airlines and more. The stock obviously fell on Friday as investors assessed the situation. But today, Wall Street analysts are formally express their thoughts.
Wells Fargo Analyst Andrew Nowinski lowered his price target on CrowdStrike stock today in anticipation of, among other things, higher legal fees in the near future, according to Investing.com. Guggenheim analyst John DiFucci lowered his price target because he expects potential clients to be reluctant to sign new contracts for a while until there is greater certainty that CrowdStrike won’t make a mistake as big as the one it made last week.
Investors are reacting today to Wall Street’s universally cautious tone.
Are the analysts right?
In short, the analyst community is currently expressing very valid concerns about CrowdStrike stock. For cybersecurity stocks, one of the biggest risks has always been the reputational risk associated with a single failure. Over the past few years, the company has seemed unstoppable as it has gained new customers and existing customers have continued to add new software modules, increasing both revenue and free cash flow. But it has always been exposed to this risk.
CrowdStrike isn’t necessarily over—I think that would be an overreaction. It’s important to note that the company’s failure was due to a software flaw, not an inability to defend against a cyberattack, which is critical. But it may still take some time for the company to fully recover from the destruction of numerous Windows systems last week. So Wall Street is being sensible in lowering its price targets today.
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