CrowdStrike: Unattractive Setup

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CrowdStrike: Unattractive Setup

seekingalpha09-02

CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming ...

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CaseyLKC
·09-02
Ok
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Big boi
·09-02
Bro going to get cucked again after all his doom posting 😂
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the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming ...</p>\n\n<a href=\"https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4097","symbol_name":"系统软件","start_time":0,"source_url":"https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup","article_id":"2464811097","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2464811097","pubTimestamp":1725277884,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming 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costly settlements.Given the legal uncertainties and better-valued alternatives in the cybersecurity market, I recommend avoiding CrowdStrike stock at this time.Sundry PhotographyCrowdStrike Holdings, Inc. (NASDAQ:CRWD) has shown some early signs of a recovery after a major IT outage last month dealt considerable reputational damage to the software-as-a-service company.Though CrowdStrike reported better-than-expected earnings for its last quarter, the software company was forced to slash its revenue and profit forecasts, a direct response to the software crash in July that sent the company’s stock into a tailspin.With CrowdStrike lowering its full year financial expectations and legal uncertainty hanging over the cybersecurity firm, I think the risk/reward relations remain uncompelling, even though the stock price has stabilized lately.My Rating HistoryA faulty security update was behind a global IT outage that was traced back to cybersecurity firm CrowdStrike in July. Negative financial implications of this crash caused me to warn investors against buying the drop of CrowdStrike’s stock.While the fallout from the software crash has been limited so far, the company is dealing with lawsuits, which create risks. I think investors best avoid CrowdStrike and focus on other cybersecurity companies.CrowdStrike Reported Better-Than-Expected 2Q24 EarningsCrowdStrike’s sales for the second quarter totaled $963.9 million, which surpassed the Wall Street estimate of $958.3 million, and its annual recurring revenue reached $3.87 billion. These numbers reflect 32% YoY growth in terms of both total sales as well as annual recurring revenue and marked records for the cybersecurity company.As is the case for software-as-a-service companies, the overwhelming majority of CrowdStrike’s sales came in the form of subscriptions, which amounted to 95% of all sales.Sales Growth (CrowdStrike Holdings, Inc.)CrowdStrike’s robust sales growth across product categories has led to a surge in profitability in the second quarter. The cybersecurity company’s quarterly profits totaled $47 million, up 455% YoY.Furthermore, CrowdStrike’s gross profit skyrocketed 32% YoY to $726.5 million, reflecting stable margins of 75%.Demand for cybersecurity services is obviously growing, though the impact of July’s IT outage has not been reflected yet in the company’s income statement.GAAP Income Statement (CrowdStrike Holdings, Inc.)CrowdStrike Adjusts Its Sales And Profit Outlook In The Wake Of The Outage DisasterWhile CrowdStrike’s growth in 2Q24 was robust, the company lowered its forecast for both sales and profits in response to the IT outage in July that caused the grounding of airplanes and other disruptions in the banking sector.CrowdStrike lowered its sales forecast from $3,976.3 - $4,010.7 million to $3,890.0 - $3,902.2 million and its profit expectations from $3.93 - $4.03 per share to $3.61 - $3.65 per share. Thus, sales and profit expectations have been revised downward 2.4% and 8.8% respectively.On the flip side, SentinelOne Inc. (S), a cybersecurity firm that competes with CrowdStrike for corporate customers, raised its annual sales forecast, primarily due to new client wins.The company now anticipates $815 million in sales this year, up from a range of $808-815 million. I named SentinelOne as a potential beneficiary of the CrowdStrike disaster, and have a stock classification of Buy for the cybersecurity company.Technical AnalysisCrowdStrike experienced a rapid change of sentiment after last month’s software outage, which caused the stock price to crash through both the 50-day and 200-day moving average lines. The stock has rebounded since, however, and is no longer oversold based on the Relative Strength Index.Taking into account that CrowdStrike is dealing with legal challenges and that it just slashed its profit forecast, I just think that investors in the cybersecurity industry have better investment choices.Moving Averages (Stockcharts.com)Unsustainable ValuationCrowdStrike correctly sharply in July, leading to a lower valuation. Unfortunately, this lower valuation is still pretty lofty and equates to an uncompelling risk/reward relationship. The market presently models $4.70 per share in profits for next year, which reflects a $0.22 downside correction since my last coverage on the software-as-a-service company.Sales estimates for next year are anchored at $4.9 billion and imply 24% YoY upside, which is reasonably if the company does not lose software contracts later this year.With a market value of $64.3 billion, CrowdStrike is selling for 13.1x leading sales and 56x next year’s estimated profits. These are still two very high multiples to pay for a company that was forced to lower its forecasts and is looking at a number of lawsuits: CrowdStrike is facing shareholder class action lawsuits as well as legal challenges from companies such as Delta Air Lines (DAL) which were particularly badly impacted by CrowdStrike’s software failures.To me, SentinelOne is a much better choice in the cybersecurity market and the stock sells for a much more sensible multiple, too: SentinelOne costs investors 7.7x leading sales, reflecting a 41% discount to CrowdStrike’s sales valuation.SentinelOne is anticipated to see a 26% sales rise next year, so the cybersecurity company is growing slightly faster than CrowdStrike as well.Revenue Estimate (Yahoo Finance)Why The Investment Thesis Might Not Work OutCrowdStrike has said that it is anticipating some deal delays in consequence of the IT outage during the summer, which is expected to cost the company $60 million in the latter half of the year.The lowered forecast reflects these developments. Class action lawsuits and legal challenges, however, create lasting uncertainty for CrowdStrike and could result in expensive settlements that could take a good chunk out of the software-as-a-service company’s profits.On the flip side, if CrowdStrike can avoid costly settlements, the company might do well moving forward, particularly if CrowdStrike maintains good customer retention.My ConclusionCrowdStrike had a fairly decent second quarter, given the highly unfortunate context surrounding its faulty security update that caused a global IT crash in July.CrowdStrike did have to cull its forecast for both its sales and profits in 2024, but one could argue that the impact has been relatively mild, indicating that the software-as-a-service company is not seeing any substantial financial headwinds (yet). I think CrowdStrike’s financial results were decent given the backdrop, and the stock has also corrected to the upside.With that said, though, CrowdStrike continues to face legal challenges, which could be a drag on the company’s valuation.With other cybersecurity investment options being available, and at better (lower) valuation multiples, I don’t see a pressing reason why investors would want to own CrowdStrike here. Avoid.","kind":"highlight","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":345090481975312,"gmtCreate":1725278598246,"gmtModify":1725278601514,"author":{"id":"4091363089250230","authorId":"4091363089250230","name":"CaseyLKC","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":7,"crmLevelSwitch":1,"idStr":"4091363089250230","authorIdStr":"4091363089250230"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/345090481975312","repostId":2464811097,"repostType":2,"repost":{"id":"2464811097","kind":"highlight","pubTimestamp":1725277884,"share":"https://ttm.financial/m/news/2464811097?lang=&edition=fundamental","pubTime":"2024-09-02 19:51","market":"nz","language":"en","title":"CrowdStrike: Unattractive Setup","url":"https://stock-news.laohu8.com/highlight/detail?id=2464811097","media":"seekingalpha","summary":"CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming fr","content":"<html><head></head><body><ul style=\"\"><li><p>CrowdStrike&#39;s recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.</p></li><li><p>Legal challenges and lawsuits stemming from the outage create ongoing risks, making the risk/reward ratio for CrowdStrike unattractive compared to competitors like SentinelOne.</p></li><li><p>Despite robust sales and profit growth, CrowdStrike&#39;s valuation remains high, and the company faces potential deal delays and costly settlements.</p></li><li><p>Given the legal uncertainties and better-valued alternatives in the cybersecurity market, I recommend avoiding CrowdStrike stock at this time.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/02eeca99da829adfd6211a47e46b320c\" tg-width=\"750\" tg-height=\"500\"/></p><p>Sundry Photography</p><p><strong><a href=\"https://laohu8.com/S/CRWD\">CrowdStrike Holdings, Inc.</a> (NASDAQ:CRWD)</strong> has shown some early signs of a recovery after a major IT outage last month dealt considerable reputational damage to the software-as-a-service company.</p><p>Though CrowdStrike reported better-than-expected earnings for its last quarter, the software company was forced to slash its revenue and profit forecasts, a direct response to the software crash in July that sent the company’s stock into a tailspin.</p><p>With CrowdStrike lowering its full year financial expectations and legal uncertainty hanging over the cybersecurity firm, I think the risk/reward relations remain uncompelling, even though the stock price has stabilized lately.</p><h2 id=\"id_550234968\">My Rating History</h2><p>A faulty security update was behind a global IT outage that was traced back to cybersecurity firm CrowdStrike in July. Negative financial implications of this crash caused me to warn investors against buying the drop of CrowdStrike’s stock.</p><p>While the fallout from the software crash has been limited so far, the company is dealing with lawsuits, which create risks. I think investors best avoid CrowdStrike and focus on other cybersecurity companies.</p><h2 id=\"id_730911221\">CrowdStrike Reported Better-Than-Expected 2Q24 Earnings</h2><p>CrowdStrike’s sales for the second quarter totaled $963.9 million, which surpassed the Wall Street estimate of $958.3 million, and its annual recurring revenue reached $3.87 billion. These numbers reflect 32% YoY growth in terms of both total sales as well as annual recurring revenue and marked records for the cybersecurity company.</p><p>As is the case for software-as-a-service companies, the overwhelming majority of CrowdStrike’s sales came in the form of subscriptions, which amounted to 95% of all sales.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/eb73d48073890254bea0bcdc12e5cb85\" tg-width=\"640\" tg-height=\"329\"/></p><p>Sales Growth (CrowdStrike Holdings, Inc.)</p><p>CrowdStrike’s robust sales growth across product categories has led to a surge in profitability in the second quarter. The cybersecurity company’s quarterly profits totaled $47 million, up 455% YoY.</p><p>Furthermore, CrowdStrike’s gross profit skyrocketed 32% YoY to $726.5 million, reflecting stable margins of 75%.</p><p>Demand for cybersecurity services is obviously growing, though the impact of July’s IT outage has not been reflected yet in the company’s income statement.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ebb07222dc11d4cdec3b9c90ad94f954\" tg-width=\"640\" tg-height=\"304\"/></p><p>GAAP Income Statement (CrowdStrike Holdings, Inc.)</p><h2 id=\"id_349085247\">CrowdStrike Adjusts Its Sales And Profit Outlook In The Wake Of The Outage Disaster</h2><p>While CrowdStrike’s growth in 2Q24 was robust, the company lowered its forecast for both sales and profits in response to the IT outage in July that caused the grounding of airplanes and other disruptions in the banking sector.</p><p>CrowdStrike lowered its sales forecast from $3,976.3 - $4,010.7 million to $3,890.0 - $3,902.2 million and its profit expectations from $3.93 - $4.03 per share to $3.61 - $3.65 per share. Thus, sales and profit expectations have been revised downward 2.4% and 8.8% respectively.</p><p>On the flip side, <strong>SentinelOne Inc. (S)</strong>, a cybersecurity firm that competes with CrowdStrike for corporate customers, raised its annual sales forecast, primarily due to new client wins.</p><p>The company now anticipates $815 million in sales this year, up from a range of $808-815 million. I named SentinelOne as a potential beneficiary of the CrowdStrike disaster, and have a stock classification of Buy for the cybersecurity company.</p><h2 id=\"id_1187714290\">Technical Analysis</h2><p>CrowdStrike experienced a rapid change of sentiment after last month’s software outage, which caused the stock price to crash through both the 50-day and 200-day moving average lines. The stock has rebounded since, however, and is no longer oversold based on the Relative Strength Index.</p><p>Taking into account that CrowdStrike is dealing with legal challenges and that it just slashed its profit forecast, I just think that investors in the cybersecurity industry have better investment choices.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/306d0aa1ccedf12027fe123bdb606bd6\" tg-width=\"640\" tg-height=\"485\"/></p><p>Moving Averages (Stockcharts.com)</p><h2 id=\"id_3454178111\">Unsustainable Valuation</h2><p>CrowdStrike correctly sharply in July, leading to a lower valuation. Unfortunately, this lower valuation is still pretty lofty and equates to an uncompelling risk/reward relationship. The market presently models $4.70 per share in profits for next year, which reflects a $0.22 downside correction since my last coverage on the software-as-a-service company.</p><p>Sales estimates for next year are anchored at $4.9 billion and imply 24% YoY upside, which is reasonably if the company does not lose software contracts later this year.</p><p>With a market value of $64.3 billion, CrowdStrike is selling for 13.1x leading sales and 56x next year’s estimated profits. These are still two very high multiples to pay for a company that was forced to lower its forecasts and is looking at a number of lawsuits: CrowdStrike is facing shareholder class action lawsuits as well as legal challenges from companies such as Delta Air Lines (DAL) which were particularly badly impacted by CrowdStrike’s software failures.</p><p>To me, SentinelOne is a much better choice in the cybersecurity market and the stock sells for a much more sensible multiple, too: SentinelOne costs investors 7.7x leading sales, reflecting a 41% discount to CrowdStrike’s sales valuation.</p><p>SentinelOne is anticipated to see a 26% sales rise next year, so the cybersecurity company is growing slightly faster than CrowdStrike as well.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/a45ccb8729db7ad8f3c1f66ca5911a81\" tg-width=\"640\" tg-height=\"223\"/></p><p>Revenue Estimate (Yahoo Finance)</p><h2 id=\"id_3667443362\">Why The Investment Thesis Might Not Work Out</h2><p>CrowdStrike has said that it is anticipating some deal delays in consequence of the IT outage during the summer, which is expected to cost the company $60 million in the latter half of the year.</p><p>The lowered forecast reflects these developments. Class action lawsuits and legal challenges, however, create lasting uncertainty for CrowdStrike and could result in expensive settlements that could take a good chunk out of the software-as-a-service company’s profits.</p><p>On the flip side, if CrowdStrike can avoid costly settlements, the company might do well moving forward, particularly if CrowdStrike maintains good customer retention.</p><h2 id=\"id_28244013\">My Conclusion</h2><p>CrowdStrike had a fairly decent second quarter, given the highly unfortunate context surrounding its faulty security update that caused a global IT crash in July.</p><p>CrowdStrike did have to cull its forecast for both its sales and profits in 2024, but one could argue that the impact has been relatively mild, indicating that the software-as-a-service company is not seeing any substantial financial headwinds (yet). I think CrowdStrike’s financial results were decent given the backdrop, and the stock has also corrected to the upside.</p><p>With that said, though, CrowdStrike continues to face legal challenges, which could be a drag on the company’s valuation.</p><p>With other cybersecurity investment options being available, and at better (lower) valuation multiples, I don’t see a pressing reason why investors would want to own CrowdStrike here. Avoid.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>CrowdStrike: Unattractive Setup</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCrowdStrike: Unattractive Setup\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-02 19:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming ...</p>\n\n<a href=\"https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"BK4097":"系统软件","BK4561":"索罗斯持仓","BK4560":"网络安全概念","LU0052756011.USD":"TEMPLETON GLOBAL BALANCED \"A\" (USD) INC","LU2106854487.HKD":"ALLIANZ THEMATICA \"AMG\" (HKD) INC","LU1720051017.SGD":"Allianz Global Artificial Intelligence AT Acc H2-SGD","LU1992135399.USD":"Allianz Global Intelligent Cities AT Acc USD","LU1917777945.USD":"安联专题基金Cl AT Acc","LU1951198990.SGD":"Natixis Thematics AI & Robotics Fund H-R/A SGD-H","BK4539":"次新股","BK4528":"SaaS概念","LU1951200564.SGD":"Natixis Thematics AI & Robotics Fund R/A SGD","LU2125909593.SGD":"Natixis Thematics Meta R/A SGD","LU2286300806.USD":"Allianz Cyber Security AT Acc USD","BK4532":"文艺复兴科技持仓","LU1923623000.USD":"Natixis Thematics AI & Robotics Fund R/A USD","LU1720051108.HKD":"ALLIANZ GLOBAL ARTIFICIAL INTELLIGENCE \"AT\" (HKD) ACC","BK4008":"航空公司","LU2125909247.SGD":"Natixis Thematics Meta H-R/A SGD","BK4585":"ETF&股票定投概念","IE00BZ9MQY76.HKD":"FTGF CLEARBRIDGE US AGGRESSIVE GROWTH \"A\" (HKD) ACC","LU1974910355.USD":"Allianz Thematica Cl AMg DIS USD","IE00BFMHRM44.USD":"NEUBERGER BERMAN GLOBAL EQUITY MEGATRENDS \"A\" (USD) ACC","LU1923622614.USD":"Natixis Thematics Meta R/A USD","LU2433249047.HKD":"THEMATICS META \"R/A\" (HKD) ACC","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","IE00B894F039.SGD":"Legg Mason ClearBridge - US Aggressive Growth A Acc SGD-H","CRWD":"CrowdStrike Holdings, Inc.","LU2125909759.SGD":"Natixis Thematics Safety H-R/A SGD","IE00B19Z9Z06.USD":"Legg Mason ClearBridge - US Aggressive Growth A Acc USD","LU1548497426.USD":"安联环球人工智能AT Acc","LU2125909916.SGD":"Natixis Thematics Safety R/A SGD","LU1267930227.SGD":"TEMPLETON GLOBAL BALANCED \"AS\" (SGD) ACC A","LU1923622291.USD":"Natixis Thematics Safety R/A USD","BK4500":"航空公司","BK4588":"碎股","LU2023250504.SGD":"Allianz Thematica Cl AMg DIS H2-SGD","LU2272731782.SGD":"Allianz Global Intelligent Cities AM Dis H2-SGD","LU0310800965.SGD":"FTIF - Templeton Global Balanced A Acc SGD","LU0128525689.USD":"TEMPLETON GLOBAL BALANCED \"A\"(USD) ACC","IE00B19Z9P08.USD":"LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH \"A\" (USD) INC","LU2272731600.USD":"Allianz Global Intelligent Cities AM Dis USD","LU1992135472.HKD":"ALLIANZ GLOBAL INTELLIGENT CITIES \"AT\" (HKD) ACC","BK4551":"寇图资本持仓"},"source_url":"https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2464811097","content_text":"CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming from the outage create ongoing risks, making the risk/reward ratio for CrowdStrike unattractive compared to competitors like SentinelOne.Despite robust sales and profit growth, CrowdStrike's valuation remains high, and the company faces potential deal delays and costly settlements.Given the legal uncertainties and better-valued alternatives in the cybersecurity market, I recommend avoiding CrowdStrike stock at this time.Sundry PhotographyCrowdStrike Holdings, Inc. (NASDAQ:CRWD) has shown some early signs of a recovery after a major IT outage last month dealt considerable reputational damage to the software-as-a-service company.Though CrowdStrike reported better-than-expected earnings for its last quarter, the software company was forced to slash its revenue and profit forecasts, a direct response to the software crash in July that sent the company’s stock into a tailspin.With CrowdStrike lowering its full year financial expectations and legal uncertainty hanging over the cybersecurity firm, I think the risk/reward relations remain uncompelling, even though the stock price has stabilized lately.My Rating HistoryA faulty security update was behind a global IT outage that was traced back to cybersecurity firm CrowdStrike in July. Negative financial implications of this crash caused me to warn investors against buying the drop of CrowdStrike’s stock.While the fallout from the software crash has been limited so far, the company is dealing with lawsuits, which create risks. I think investors best avoid CrowdStrike and focus on other cybersecurity companies.CrowdStrike Reported Better-Than-Expected 2Q24 EarningsCrowdStrike’s sales for the second quarter totaled $963.9 million, which surpassed the Wall Street estimate of $958.3 million, and its annual recurring revenue reached $3.87 billion. These numbers reflect 32% YoY growth in terms of both total sales as well as annual recurring revenue and marked records for the cybersecurity company.As is the case for software-as-a-service companies, the overwhelming majority of CrowdStrike’s sales came in the form of subscriptions, which amounted to 95% of all sales.Sales Growth (CrowdStrike Holdings, Inc.)CrowdStrike’s robust sales growth across product categories has led to a surge in profitability in the second quarter. The cybersecurity company’s quarterly profits totaled $47 million, up 455% YoY.Furthermore, CrowdStrike’s gross profit skyrocketed 32% YoY to $726.5 million, reflecting stable margins of 75%.Demand for cybersecurity services is obviously growing, though the impact of July’s IT outage has not been reflected yet in the company’s income statement.GAAP Income Statement (CrowdStrike Holdings, Inc.)CrowdStrike Adjusts Its Sales And Profit Outlook In The Wake Of The Outage DisasterWhile CrowdStrike’s growth in 2Q24 was robust, the company lowered its forecast for both sales and profits in response to the IT outage in July that caused the grounding of airplanes and other disruptions in the banking sector.CrowdStrike lowered its sales forecast from $3,976.3 - $4,010.7 million to $3,890.0 - $3,902.2 million and its profit expectations from $3.93 - $4.03 per share to $3.61 - $3.65 per share. Thus, sales and profit expectations have been revised downward 2.4% and 8.8% respectively.On the flip side, SentinelOne Inc. (S), a cybersecurity firm that competes with CrowdStrike for corporate customers, raised its annual sales forecast, primarily due to new client wins.The company now anticipates $815 million in sales this year, up from a range of $808-815 million. I named SentinelOne as a potential beneficiary of the CrowdStrike disaster, and have a stock classification of Buy for the cybersecurity company.Technical AnalysisCrowdStrike experienced a rapid change of sentiment after last month’s software outage, which caused the stock price to crash through both the 50-day and 200-day moving average lines. The stock has rebounded since, however, and is no longer oversold based on the Relative Strength Index.Taking into account that CrowdStrike is dealing with legal challenges and that it just slashed its profit forecast, I just think that investors in the cybersecurity industry have better investment choices.Moving Averages (Stockcharts.com)Unsustainable ValuationCrowdStrike correctly sharply in July, leading to a lower valuation. Unfortunately, this lower valuation is still pretty lofty and equates to an uncompelling risk/reward relationship. The market presently models $4.70 per share in profits for next year, which reflects a $0.22 downside correction since my last coverage on the software-as-a-service company.Sales estimates for next year are anchored at $4.9 billion and imply 24% YoY upside, which is reasonably if the company does not lose software contracts later this year.With a market value of $64.3 billion, CrowdStrike is selling for 13.1x leading sales and 56x next year’s estimated profits. These are still two very high multiples to pay for a company that was forced to lower its forecasts and is looking at a number of lawsuits: CrowdStrike is facing shareholder class action lawsuits as well as legal challenges from companies such as Delta Air Lines (DAL) which were particularly badly impacted by CrowdStrike’s software failures.To me, SentinelOne is a much better choice in the cybersecurity market and the stock sells for a much more sensible multiple, too: SentinelOne costs investors 7.7x leading sales, reflecting a 41% discount to CrowdStrike’s sales valuation.SentinelOne is anticipated to see a 26% sales rise next year, so the cybersecurity company is growing slightly faster than CrowdStrike as well.Revenue Estimate (Yahoo Finance)Why The Investment Thesis Might Not Work OutCrowdStrike has said that it is anticipating some deal delays in consequence of the IT outage during the summer, which is expected to cost the company $60 million in the latter half of the year.The lowered forecast reflects these developments. Class action lawsuits and legal challenges, however, create lasting uncertainty for CrowdStrike and could result in expensive settlements that could take a good chunk out of the software-as-a-service company’s profits.On the flip side, if CrowdStrike can avoid costly settlements, the company might do well moving forward, particularly if CrowdStrike maintains good customer retention.My ConclusionCrowdStrike had a fairly decent second quarter, given the highly unfortunate context surrounding its faulty security update that caused a global IT crash in July.CrowdStrike did have to cull its forecast for both its sales and profits in 2024, but one could argue that the impact has been relatively mild, indicating that the software-as-a-service company is not seeing any substantial financial headwinds (yet). I think CrowdStrike’s financial results were decent given the backdrop, and the stock has also corrected to the upside.With that said, though, CrowdStrike continues to face legal challenges, which could be a drag on the company’s valuation.With other cybersecurity investment options being available, and at better (lower) valuation multiples, I don’t see a pressing reason why investors would want to own CrowdStrike here. Avoid.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":345088874082520,"gmtCreate":1725278294229,"gmtModify":1725284234419,"author":{"id":"4101342527315700","authorId":"4101342527315700","name":"Big boi","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":7,"crmLevelSwitch":0,"idStr":"4101342527315700","authorIdStr":"4101342527315700"},"htmlText":"Bro going to get cucked again after all his doom posting 😂","listText":"Bro going to get cucked again after all his doom posting 😂","text":"Bro going to get cucked again after all his doom posting 😂","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/345088874082520","repostId":2464811097,"repostType":2,"repost":{"id":"2464811097","kind":"highlight","pubTimestamp":1725277884,"share":"https://ttm.financial/m/news/2464811097?lang=&edition=fundamental","pubTime":"2024-09-02 19:51","market":"nz","language":"en","title":"CrowdStrike: Unattractive Setup","url":"https://stock-news.laohu8.com/highlight/detail?id=2464811097","media":"seekingalpha","summary":"CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming fr","content":"<html><head></head><body><ul style=\"\"><li><p>CrowdStrike&#39;s recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.</p></li><li><p>Legal challenges and lawsuits stemming from the outage create ongoing risks, making the risk/reward ratio for CrowdStrike unattractive compared to competitors like SentinelOne.</p></li><li><p>Despite robust sales and profit growth, CrowdStrike&#39;s valuation remains high, and the company faces potential deal delays and costly settlements.</p></li><li><p>Given the legal uncertainties and better-valued alternatives in the cybersecurity market, I recommend avoiding CrowdStrike stock at this time.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/02eeca99da829adfd6211a47e46b320c\" tg-width=\"750\" tg-height=\"500\"/></p><p>Sundry Photography</p><p><strong><a href=\"https://laohu8.com/S/CRWD\">CrowdStrike Holdings, Inc.</a> (NASDAQ:CRWD)</strong> has shown some early signs of a recovery after a major IT outage last month dealt considerable reputational damage to the software-as-a-service company.</p><p>Though CrowdStrike reported better-than-expected earnings for its last quarter, the software company was forced to slash its revenue and profit forecasts, a direct response to the software crash in July that sent the company’s stock into a tailspin.</p><p>With CrowdStrike lowering its full year financial expectations and legal uncertainty hanging over the cybersecurity firm, I think the risk/reward relations remain uncompelling, even though the stock price has stabilized lately.</p><h2 id=\"id_550234968\">My Rating History</h2><p>A faulty security update was behind a global IT outage that was traced back to cybersecurity firm CrowdStrike in July. Negative financial implications of this crash caused me to warn investors against buying the drop of CrowdStrike’s stock.</p><p>While the fallout from the software crash has been limited so far, the company is dealing with lawsuits, which create risks. I think investors best avoid CrowdStrike and focus on other cybersecurity companies.</p><h2 id=\"id_730911221\">CrowdStrike Reported Better-Than-Expected 2Q24 Earnings</h2><p>CrowdStrike’s sales for the second quarter totaled $963.9 million, which surpassed the Wall Street estimate of $958.3 million, and its annual recurring revenue reached $3.87 billion. These numbers reflect 32% YoY growth in terms of both total sales as well as annual recurring revenue and marked records for the cybersecurity company.</p><p>As is the case for software-as-a-service companies, the overwhelming majority of CrowdStrike’s sales came in the form of subscriptions, which amounted to 95% of all sales.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/eb73d48073890254bea0bcdc12e5cb85\" tg-width=\"640\" tg-height=\"329\"/></p><p>Sales Growth (CrowdStrike Holdings, Inc.)</p><p>CrowdStrike’s robust sales growth across product categories has led to a surge in profitability in the second quarter. The cybersecurity company’s quarterly profits totaled $47 million, up 455% YoY.</p><p>Furthermore, CrowdStrike’s gross profit skyrocketed 32% YoY to $726.5 million, reflecting stable margins of 75%.</p><p>Demand for cybersecurity services is obviously growing, though the impact of July’s IT outage has not been reflected yet in the company’s income statement.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ebb07222dc11d4cdec3b9c90ad94f954\" tg-width=\"640\" tg-height=\"304\"/></p><p>GAAP Income Statement (CrowdStrike Holdings, Inc.)</p><h2 id=\"id_349085247\">CrowdStrike Adjusts Its Sales And Profit Outlook In The Wake Of The Outage Disaster</h2><p>While CrowdStrike’s growth in 2Q24 was robust, the company lowered its forecast for both sales and profits in response to the IT outage in July that caused the grounding of airplanes and other disruptions in the banking sector.</p><p>CrowdStrike lowered its sales forecast from $3,976.3 - $4,010.7 million to $3,890.0 - $3,902.2 million and its profit expectations from $3.93 - $4.03 per share to $3.61 - $3.65 per share. Thus, sales and profit expectations have been revised downward 2.4% and 8.8% respectively.</p><p>On the flip side, <strong>SentinelOne Inc. (S)</strong>, a cybersecurity firm that competes with CrowdStrike for corporate customers, raised its annual sales forecast, primarily due to new client wins.</p><p>The company now anticipates $815 million in sales this year, up from a range of $808-815 million. I named SentinelOne as a potential beneficiary of the CrowdStrike disaster, and have a stock classification of Buy for the cybersecurity company.</p><h2 id=\"id_1187714290\">Technical Analysis</h2><p>CrowdStrike experienced a rapid change of sentiment after last month’s software outage, which caused the stock price to crash through both the 50-day and 200-day moving average lines. The stock has rebounded since, however, and is no longer oversold based on the Relative Strength Index.</p><p>Taking into account that CrowdStrike is dealing with legal challenges and that it just slashed its profit forecast, I just think that investors in the cybersecurity industry have better investment choices.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/306d0aa1ccedf12027fe123bdb606bd6\" tg-width=\"640\" tg-height=\"485\"/></p><p>Moving Averages (Stockcharts.com)</p><h2 id=\"id_3454178111\">Unsustainable Valuation</h2><p>CrowdStrike correctly sharply in July, leading to a lower valuation. Unfortunately, this lower valuation is still pretty lofty and equates to an uncompelling risk/reward relationship. The market presently models $4.70 per share in profits for next year, which reflects a $0.22 downside correction since my last coverage on the software-as-a-service company.</p><p>Sales estimates for next year are anchored at $4.9 billion and imply 24% YoY upside, which is reasonably if the company does not lose software contracts later this year.</p><p>With a market value of $64.3 billion, CrowdStrike is selling for 13.1x leading sales and 56x next year’s estimated profits. These are still two very high multiples to pay for a company that was forced to lower its forecasts and is looking at a number of lawsuits: CrowdStrike is facing shareholder class action lawsuits as well as legal challenges from companies such as Delta Air Lines (DAL) which were particularly badly impacted by CrowdStrike’s software failures.</p><p>To me, SentinelOne is a much better choice in the cybersecurity market and the stock sells for a much more sensible multiple, too: SentinelOne costs investors 7.7x leading sales, reflecting a 41% discount to CrowdStrike’s sales valuation.</p><p>SentinelOne is anticipated to see a 26% sales rise next year, so the cybersecurity company is growing slightly faster than CrowdStrike as well.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/a45ccb8729db7ad8f3c1f66ca5911a81\" tg-width=\"640\" tg-height=\"223\"/></p><p>Revenue Estimate (Yahoo Finance)</p><h2 id=\"id_3667443362\">Why The Investment Thesis Might Not Work Out</h2><p>CrowdStrike has said that it is anticipating some deal delays in consequence of the IT outage during the summer, which is expected to cost the company $60 million in the latter half of the year.</p><p>The lowered forecast reflects these developments. Class action lawsuits and legal challenges, however, create lasting uncertainty for CrowdStrike and could result in expensive settlements that could take a good chunk out of the software-as-a-service company’s profits.</p><p>On the flip side, if CrowdStrike can avoid costly settlements, the company might do well moving forward, particularly if CrowdStrike maintains good customer retention.</p><h2 id=\"id_28244013\">My Conclusion</h2><p>CrowdStrike had a fairly decent second quarter, given the highly unfortunate context surrounding its faulty security update that caused a global IT crash in July.</p><p>CrowdStrike did have to cull its forecast for both its sales and profits in 2024, but one could argue that the impact has been relatively mild, indicating that the software-as-a-service company is not seeing any substantial financial headwinds (yet). I think CrowdStrike’s financial results were decent given the backdrop, and the stock has also corrected to the upside.</p><p>With that said, though, CrowdStrike continues to face legal challenges, which could be a drag on the company’s valuation.</p><p>With other cybersecurity investment options being available, and at better (lower) valuation multiples, I don’t see a pressing reason why investors would want to own CrowdStrike here. Avoid.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>CrowdStrike: Unattractive Setup</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; 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}\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCrowdStrike: Unattractive Setup\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-02 19:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming ...</p>\n\n<a href=\"https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"BK4097":"系统软件","BK4561":"索罗斯持仓","BK4560":"网络安全概念","LU0052756011.USD":"TEMPLETON GLOBAL BALANCED \"A\" (USD) INC","LU2106854487.HKD":"ALLIANZ THEMATICA \"AMG\" (HKD) INC","LU1720051017.SGD":"Allianz Global Artificial Intelligence AT Acc H2-SGD","LU1992135399.USD":"Allianz Global Intelligent Cities AT Acc USD","LU1917777945.USD":"安联专题基金Cl AT Acc","LU1951198990.SGD":"Natixis Thematics AI & Robotics Fund H-R/A SGD-H","BK4539":"次新股","BK4528":"SaaS概念","LU1951200564.SGD":"Natixis Thematics AI & Robotics Fund R/A SGD","LU2125909593.SGD":"Natixis Thematics Meta R/A SGD","LU2286300806.USD":"Allianz Cyber Security AT Acc USD","BK4532":"文艺复兴科技持仓","LU1923623000.USD":"Natixis Thematics AI & Robotics Fund R/A USD","LU1720051108.HKD":"ALLIANZ GLOBAL ARTIFICIAL INTELLIGENCE \"AT\" (HKD) ACC","BK4008":"航空公司","LU2125909247.SGD":"Natixis Thematics Meta H-R/A SGD","BK4585":"ETF&股票定投概念","IE00BZ9MQY76.HKD":"FTGF CLEARBRIDGE US AGGRESSIVE GROWTH \"A\" (HKD) ACC","LU1974910355.USD":"Allianz Thematica Cl AMg DIS USD","IE00BFMHRM44.USD":"NEUBERGER BERMAN GLOBAL EQUITY MEGATRENDS \"A\" (USD) ACC","LU1923622614.USD":"Natixis Thematics Meta R/A USD","LU2433249047.HKD":"THEMATICS META \"R/A\" (HKD) ACC","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","IE00B894F039.SGD":"Legg Mason ClearBridge - US Aggressive Growth A Acc SGD-H","CRWD":"CrowdStrike Holdings, Inc.","LU2125909759.SGD":"Natixis Thematics Safety H-R/A SGD","IE00B19Z9Z06.USD":"Legg Mason ClearBridge - US Aggressive Growth A Acc USD","LU1548497426.USD":"安联环球人工智能AT Acc","LU2125909916.SGD":"Natixis Thematics Safety R/A SGD","LU1267930227.SGD":"TEMPLETON GLOBAL BALANCED \"AS\" (SGD) ACC A","LU1923622291.USD":"Natixis Thematics Safety R/A USD","BK4500":"航空公司","BK4588":"碎股","LU2023250504.SGD":"Allianz Thematica Cl AMg DIS H2-SGD","LU2272731782.SGD":"Allianz Global Intelligent Cities AM Dis H2-SGD","LU0310800965.SGD":"FTIF - Templeton Global Balanced A Acc SGD","LU0128525689.USD":"TEMPLETON GLOBAL BALANCED \"A\"(USD) ACC","IE00B19Z9P08.USD":"LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH \"A\" (USD) INC","LU2272731600.USD":"Allianz Global Intelligent Cities AM Dis USD","LU1992135472.HKD":"ALLIANZ GLOBAL INTELLIGENT CITIES \"AT\" (HKD) ACC","BK4551":"寇图资本持仓"},"source_url":"https://seekingalpha.com/article/4718408-crowdstrike-unattractive-setup","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2464811097","content_text":"CrowdStrike's recent IT outage led to a significant reputational hit, causing the company to lower its revenue and profit forecasts despite strong Q2 earnings.Legal challenges and lawsuits stemming from the outage create ongoing risks, making the risk/reward ratio for CrowdStrike unattractive compared to competitors like SentinelOne.Despite robust sales and profit growth, CrowdStrike's valuation remains high, and the company faces potential deal delays and costly settlements.Given the legal uncertainties and better-valued alternatives in the cybersecurity market, I recommend avoiding CrowdStrike stock at this time.Sundry PhotographyCrowdStrike Holdings, Inc. (NASDAQ:CRWD) has shown some early signs of a recovery after a major IT outage last month dealt considerable reputational damage to the software-as-a-service company.Though CrowdStrike reported better-than-expected earnings for its last quarter, the software company was forced to slash its revenue and profit forecasts, a direct response to the software crash in July that sent the company’s stock into a tailspin.With CrowdStrike lowering its full year financial expectations and legal uncertainty hanging over the cybersecurity firm, I think the risk/reward relations remain uncompelling, even though the stock price has stabilized lately.My Rating HistoryA faulty security update was behind a global IT outage that was traced back to cybersecurity firm CrowdStrike in July. Negative financial implications of this crash caused me to warn investors against buying the drop of CrowdStrike’s stock.While the fallout from the software crash has been limited so far, the company is dealing with lawsuits, which create risks. I think investors best avoid CrowdStrike and focus on other cybersecurity companies.CrowdStrike Reported Better-Than-Expected 2Q24 EarningsCrowdStrike’s sales for the second quarter totaled $963.9 million, which surpassed the Wall Street estimate of $958.3 million, and its annual recurring revenue reached $3.87 billion. These numbers reflect 32% YoY growth in terms of both total sales as well as annual recurring revenue and marked records for the cybersecurity company.As is the case for software-as-a-service companies, the overwhelming majority of CrowdStrike’s sales came in the form of subscriptions, which amounted to 95% of all sales.Sales Growth (CrowdStrike Holdings, Inc.)CrowdStrike’s robust sales growth across product categories has led to a surge in profitability in the second quarter. The cybersecurity company’s quarterly profits totaled $47 million, up 455% YoY.Furthermore, CrowdStrike’s gross profit skyrocketed 32% YoY to $726.5 million, reflecting stable margins of 75%.Demand for cybersecurity services is obviously growing, though the impact of July’s IT outage has not been reflected yet in the company’s income statement.GAAP Income Statement (CrowdStrike Holdings, Inc.)CrowdStrike Adjusts Its Sales And Profit Outlook In The Wake Of The Outage DisasterWhile CrowdStrike’s growth in 2Q24 was robust, the company lowered its forecast for both sales and profits in response to the IT outage in July that caused the grounding of airplanes and other disruptions in the banking sector.CrowdStrike lowered its sales forecast from $3,976.3 - $4,010.7 million to $3,890.0 - $3,902.2 million and its profit expectations from $3.93 - $4.03 per share to $3.61 - $3.65 per share. Thus, sales and profit expectations have been revised downward 2.4% and 8.8% respectively.On the flip side, SentinelOne Inc. (S), a cybersecurity firm that competes with CrowdStrike for corporate customers, raised its annual sales forecast, primarily due to new client wins.The company now anticipates $815 million in sales this year, up from a range of $808-815 million. I named SentinelOne as a potential beneficiary of the CrowdStrike disaster, and have a stock classification of Buy for the cybersecurity company.Technical AnalysisCrowdStrike experienced a rapid change of sentiment after last month’s software outage, which caused the stock price to crash through both the 50-day and 200-day moving average lines. The stock has rebounded since, however, and is no longer oversold based on the Relative Strength Index.Taking into account that CrowdStrike is dealing with legal challenges and that it just slashed its profit forecast, I just think that investors in the cybersecurity industry have better investment choices.Moving Averages (Stockcharts.com)Unsustainable ValuationCrowdStrike correctly sharply in July, leading to a lower valuation. Unfortunately, this lower valuation is still pretty lofty and equates to an uncompelling risk/reward relationship. The market presently models $4.70 per share in profits for next year, which reflects a $0.22 downside correction since my last coverage on the software-as-a-service company.Sales estimates for next year are anchored at $4.9 billion and imply 24% YoY upside, which is reasonably if the company does not lose software contracts later this year.With a market value of $64.3 billion, CrowdStrike is selling for 13.1x leading sales and 56x next year’s estimated profits. These are still two very high multiples to pay for a company that was forced to lower its forecasts and is looking at a number of lawsuits: CrowdStrike is facing shareholder class action lawsuits as well as legal challenges from companies such as Delta Air Lines (DAL) which were particularly badly impacted by CrowdStrike’s software failures.To me, SentinelOne is a much better choice in the cybersecurity market and the stock sells for a much more sensible multiple, too: SentinelOne costs investors 7.7x leading sales, reflecting a 41% discount to CrowdStrike’s sales valuation.SentinelOne is anticipated to see a 26% sales rise next year, so the cybersecurity company is growing slightly faster than CrowdStrike as well.Revenue Estimate (Yahoo Finance)Why The Investment Thesis Might Not Work OutCrowdStrike has said that it is anticipating some deal delays in consequence of the IT outage during the summer, which is expected to cost the company $60 million in the latter half of the year.The lowered forecast reflects these developments. Class action lawsuits and legal challenges, however, create lasting uncertainty for CrowdStrike and could result in expensive settlements that could take a good chunk out of the software-as-a-service company’s profits.On the flip side, if CrowdStrike can avoid costly settlements, the company might do well moving forward, particularly if CrowdStrike maintains good customer retention.My ConclusionCrowdStrike had a fairly decent second quarter, given the highly unfortunate context surrounding its faulty security update that caused a global IT crash in July.CrowdStrike did have to cull its forecast for both its sales and profits in 2024, but one could argue that the impact has been relatively mild, indicating that the software-as-a-service company is not seeing any substantial financial headwinds (yet). I think CrowdStrike’s financial results were decent given the backdrop, and the stock has also corrected to the upside.With that said, though, CrowdStrike continues to face legal challenges, which could be a drag on the company’s valuation.With other cybersecurity investment options being available, and at better (lower) valuation multiples, I don’t see a pressing reason why investors would want to own CrowdStrike here. Avoid.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":5,"commentSize":2,"repostSize":2,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}