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CrowdStrike's EPS Estimates Southbound: Time to Sell CRWD Stock?
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CrowdStrike Holdings, Inc. (CRWD - Free Report) , a cybersecurity leader known for its advanced Falcon platform, has been a top performer in the tech space for years. However, its second-quarter fiscal 2025 earnings results, released on Aug. 28, 2024, have triggered concerns among investors. Analysts have slashed CrowdStrike’s earnings per share (EPS) estimates, and the company’s guidance for the full fiscal reflects a more challenging outlook. The key question now is – Should investors consider selling CRWD stock?
CrowdStrike’s Slowing Sales Growth and Lowered Guidance
In its second-quarter fiscal 2025 report, CrowdStrike posted solid revenue growth, increasing 32% year over year to $963.9 million, with subscription revenues growing by 33%. Its annual recurring revenue (ARR) reached $3.86 billion, a 32% increase over the prior year. At face value, these numbers might seem impressive, but they mask an undeniable slowdown in the company’s growth rate.
Up until fiscal 2023, CrowdStrike was regularly delivering more than 50% annual revenue growth, a pace that cemented its reputation as a high-growth tech stock. However, the growth rate has been decelerating since fiscal 2024, and in the recently reported quarter, it reached the low-30s percentage range.
To make matters worse, the July 19 IT outage that affected millions of Microsoft Corporation’s (MSFT - Free Report) Windows operating system-based devices globally further compounded the problem. According to CrowdStrike’s chief financial officer, Burt Podbere, the incident diverted resources and delayed over $60 million worth of deals, many of which remain pending.
This disruption, along with other challenges such as extended sales cycles, led CrowdStrike to cut its revenue and EPS guidance for fiscal 2025. Management now expects total revenues in the range of $3.89 billion to $3.90 billion, reflecting a year-over-year growth rate of 27% to 28%. Non-GAAP net income per share is projected to be between $3.61 and $3.65, both figures lower than earlier forecasts.
These guidance revisions, coupled with comments from management about more conservative customer spending and prolonged deal cycles, have led analysts to lower their EPS estimates for CrowdStrike. When analysts revise their expectations downward, it can be a strong indicator of future underperformance.
Image Source: Zacks Investment Research
CRWD’s Lofty Valuation: Too Pricey for Slowing Growth
CrowdStrike shares have been under pressure since the July 19 incident, and the recent fiscal 2025 guidance cut has further enhanced investors’ worries. CRWD stock has plunged 24.4% since July 19, underperforming the Zacks Internet – Software industry’s gain of 3.5%. The stock has also underperformed its top peers, Palo Alto Networks, Inc. (PANW - Free Report) and Fortinet, Inc. (FTNT - Free Report) , which have soared 32.2% and 6.9%, respectively, during the same time frame.
Price Return Performance Since July 19
Image Source: Zacks Investment Research
Even after recent share price declines, CrowdStrike trades at a forward 12-month price-to-earnings (P/E) multiple of 59.37X, way premium to the industry average of 31.93X. Similar is the case with the forward 12-month price-to-sales (P/S) ratio, wherein CRWD trades at a 14.08X multiple while the industry has 2.51X.
High-growth stocks like CrowdStrike are typically valued on their future potential, meaning the stock price is often inflated relative to current earnings and sales. This is acceptable when growth is strong, but when growth shows signs of slowing, as in CrowdStrike's case, it is wise to reevaluate the premium one should pay. With the company itself signaling a more challenging environment ahead, this premium valuation might not be sustainable.
Cybersecurity rivals like Palo Alto Networks and Fortinet are offering more attractive valuations and steady growth. PANW and FTNT currently trade at a forward 12-month P/S multiples of 12.02X and 9.17X, respectively. Talking about the forward 12-month P/E ratio, Palo Alto Networks trades at 54.30X multiple while Fortinet has 36.07X.
To add further concern, CRWD shares have now fallen below their 50-day and 200-day moving averages - key technical levels that often signal a bearish trend.
Moving Averages Indicate Bearish Trend
Image Source: Zacks Investment Research
Conclusion: Sell CRWD Stock
While CrowdStrike is still a cybersecurity leader, the combination of slowing growth, lowered guidance and bearish technical indicators suggests that its stock could face more downside in the near future. Its elevated valuation, combined with downward revisions in EPS estimates, raises concerns about whether it can justify its current price.
For risk-averse investors or those looking for more stable growth opportunities, selling CRWD stock now might be the best move. While the long-term outlook for cybersecurity remains solid, the near-term risks for this Zacks Rank #4 (Sell) company seem too significant to ignore.
Image: Shutterstock
CrowdStrike's EPS Estimates Southbound: Time to Sell CRWD Stock?
CrowdStrike Holdings, Inc. (CRWD - Free Report) , a cybersecurity leader known for its advanced Falcon platform, has been a top performer in the tech space for years. However, its second-quarter fiscal 2025 earnings results, released on Aug. 28, 2024, have triggered concerns among investors. Analysts have slashed CrowdStrike’s earnings per share (EPS) estimates, and the company’s guidance for the full fiscal reflects a more challenging outlook. The key question now is – Should investors consider selling CRWD stock?
CrowdStrike’s Slowing Sales Growth and Lowered Guidance
In its second-quarter fiscal 2025 report, CrowdStrike posted solid revenue growth, increasing 32% year over year to $963.9 million, with subscription revenues growing by 33%. Its annual recurring revenue (ARR) reached $3.86 billion, a 32% increase over the prior year. At face value, these numbers might seem impressive, but they mask an undeniable slowdown in the company’s growth rate.
Up until fiscal 2023, CrowdStrike was regularly delivering more than 50% annual revenue growth, a pace that cemented its reputation as a high-growth tech stock. However, the growth rate has been decelerating since fiscal 2024, and in the recently reported quarter, it reached the low-30s percentage range.
To make matters worse, the July 19 IT outage that affected millions of Microsoft Corporation’s (MSFT - Free Report) Windows operating system-based devices globally further compounded the problem. According to CrowdStrike’s chief financial officer, Burt Podbere, the incident diverted resources and delayed over $60 million worth of deals, many of which remain pending.
This disruption, along with other challenges such as extended sales cycles, led CrowdStrike to cut its revenue and EPS guidance for fiscal 2025. Management now expects total revenues in the range of $3.89 billion to $3.90 billion, reflecting a year-over-year growth rate of 27% to 28%. Non-GAAP net income per share is projected to be between $3.61 and $3.65, both figures lower than earlier forecasts.
These guidance revisions, coupled with comments from management about more conservative customer spending and prolonged deal cycles, have led analysts to lower their EPS estimates for CrowdStrike. When analysts revise their expectations downward, it can be a strong indicator of future underperformance.
Image Source: Zacks Investment Research
CRWD’s Lofty Valuation: Too Pricey for Slowing Growth
CrowdStrike shares have been under pressure since the July 19 incident, and the recent fiscal 2025 guidance cut has further enhanced investors’ worries. CRWD stock has plunged 24.4% since July 19, underperforming the Zacks Internet – Software industry’s gain of 3.5%. The stock has also underperformed its top peers, Palo Alto Networks, Inc. (PANW - Free Report) and Fortinet, Inc. (FTNT - Free Report) , which have soared 32.2% and 6.9%, respectively, during the same time frame.
Price Return Performance Since July 19
Image Source: Zacks Investment Research
Even after recent share price declines, CrowdStrike trades at a forward 12-month price-to-earnings (P/E) multiple of 59.37X, way premium to the industry average of 31.93X. Similar is the case with the forward 12-month price-to-sales (P/S) ratio, wherein CRWD trades at a 14.08X multiple while the industry has 2.51X.
High-growth stocks like CrowdStrike are typically valued on their future potential, meaning the stock price is often inflated relative to current earnings and sales. This is acceptable when growth is strong, but when growth shows signs of slowing, as in CrowdStrike's case, it is wise to reevaluate the premium one should pay. With the company itself signaling a more challenging environment ahead, this premium valuation might not be sustainable.
Cybersecurity rivals like Palo Alto Networks and Fortinet are offering more attractive valuations and steady growth. PANW and FTNT currently trade at a forward 12-month P/S multiples of 12.02X and 9.17X, respectively. Talking about the forward 12-month P/E ratio, Palo Alto Networks trades at 54.30X multiple while Fortinet has 36.07X.
To add further concern, CRWD shares have now fallen below their 50-day and 200-day moving averages - key technical levels that often signal a bearish trend.
Moving Averages Indicate Bearish Trend
Image Source: Zacks Investment Research
Conclusion: Sell CRWD Stock
While CrowdStrike is still a cybersecurity leader, the combination of slowing growth, lowered guidance and bearish technical indicators suggests that its stock could face more downside in the near future. Its elevated valuation, combined with downward revisions in EPS estimates, raises concerns about whether it can justify its current price.
For risk-averse investors or those looking for more stable growth opportunities, selling CRWD stock now might be the best move. While the long-term outlook for cybersecurity remains solid, the near-term risks for this Zacks Rank #4 (Sell) company seem too significant to ignore.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.