CrowdStrike Stock Dips on Guidance Miss: It May Rebound Fast
CrowdStrike Holdings Inc. (NASDAQ: CRWD) is down more than 6% after delivering its first quarter earnings report after the market closed on June 3. The company beat on the bottom line. However, revenue came in as expected. Furthermore, the company’s guidance was not as bullish as investors hoped.
The takeaway is simple. As was the case with many technology stocks this earnings season, the sharp move prior to earnings was the overreaction. This is a move back to equilibrium.
It’s also an opportunity for investors to get involved with CRWD stock at a better price. But if investors are looking for that better price, they shouldn’t wait too long, because this dip isn’t likely to get much deeper.
CrowdStrike Didn’t Stick the Landing
If CrowdStrike’s earnings report was a gymnastics routine, people could say it was flawless, but the company didn’t stick the landing. That landing was in the guidance for full-year revenue. It came in as expected. However, with a stock that was trading at a premium before the report, analysts and investors wanted to see more.
But it’s important to understand what the company delivered.
- Topline revenue of $1.10 billion was in line with expectations for $1.11 billion.
- Revenue was 20% higher year-over-year (YOY).
- Annual recurring revenue was up 22% YOY.
- Earnings per share (EPS) of 73 cents came in ahead of forecasts of 66 cents and was 265% higher YOY.
The issue became the guidance. For the current quarter, CrowdStrike guided to revenue between $1.145 billion and $1.152 billion. Analysts were estimating $1.23 billion. The company’s earnings per share estimate of between 82 cents to 84 cents per share was also below estimates of 92 cents.
The Long-Term Outlook Is What Matters
On May 23, DZ Bank downgraded CRWD stock from a Strong Buy to a Strong Sell with a price target of $370. Options traders were also bearish on CrowdStrike heading into earnings. In both cases, the sentiment was around CRWD stock being priced for perfection.
The reason for that sentiment is that CrowdStrike is expecting subscription revenue in 2025 to be impacted by the goodwill offerings it made to customers in response to its well-publicized outage in 2024. These offerings allowed customers to sample services within CrowdStrike’s Falcon platform at no charge.
However, investors need to be careful about putting too much emphasis on the short-term price movement. That’s because the impact of those goodwill offerings is projected to lessen in the second half of the year. On the earnings call, management confirmed the company already has booked $3.2 billion in revenue from its FalconFlex subscription model.
The company expects business to accelerate in the second half of the year. To support that expectation, CrowdStrike maintained its full-year revenue outlook from $4.743 billion to $4.805 billion. The layoffs enacted earlier this year are also expected to benefit the company's bottom line.
That also explains why, since the report, at least a dozen analysts are weighing in with many increasing their price targets for the stock. Dan Ives of Wedbush is among the most bullish, with a price target of $525.
Don't Blink, or You’ll Miss the Dip in CRWD Stock
CRWD stock had rallied hard in the last few trading days before the earnings report. That left the stock priced for perfection, and investors decided they didn’t get perfect results.
To be fair, the stock isn’t at oversold levels—it hasn’t been since it hit around $312 in March. Nothing in the report suggested a massive sell-off that would collapse the stock price. Therefore, this may be your opportunity if you want to buy the dip.
Early trading on June 4 suggests that many investors already have the same idea. By midday, CRWD stock had already covered about half of the dip in post-earnings. Investors hoping to get in at a price of around $325, which would bring its valuation down to about 16x, will be disappointed.
However, it’s time to focus on the potential for a breakout. As analysts raise their price targets, it’s not hard to imagine the stock climbing another 15% or more from its current levels.
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