CrowdStrike (CRWD) plunges 20% after 'messy' and 'disappointing' results

Shares of CrowdStrike (NASDAQ: CRWD) are trading about 20% down in pre-open Wednesday after the cybersecurity company delivered a disappointing earnings report.

CrowdStrike reported adjusted EPS of $0.40 on revenue of $580.9 million, beating the average analyst estimate of $0.32 on sales of $575.16M. Subscription revenue increased by 53% year-over-year to $547.4M, a minor beat compared to the consensus of $545.7M.

Annual recurring revenue (ARR) soared 54% to $2.34 billion, also ahead of the consensus. However, net new annual recurring revenue is what disappointed investors as it came in at $198.1M, missing the estimate of $209M.

The company blamed weak ARR on increased macroeconomic headwinds which “elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates, which delays ARR recognition until future quarters."

For this quarter, CRWD sees adjusted EPS in the range of $0.42-0.45, easily ahead of the consensus of $0.34. Revenue is seen between $619.1M and $628.2M, a miss relative to the $632.84M consensus.

For FY2023, CrowdStrike raised the adjusted EPS forecast to $1.49-1.52 from $1.31-1.33. Revenue is seen between $2.22B and $2.23B. Analysts were expecting FY23 adjusted EPS of $1.32 on revenue of $2.23B.

Stifel analyst Brad Reback downgraded CrowdStrike shares to Hold from Buy after a “messy” and “disappointing” quarter.

“Although management's preliminary CY24 outlook was below consensus, we believe it could take a few quarters until expectations are fully de-risked, and as a result, we lower our rating to Hold, meaningfully cut our estimates, and reduce our TP to $120,” Reback said in a client note.

Mizuho analyst Gregg Moskowitz cut the price target to $175 per share from $205. While he notes that the CRWD stock selloff is “understandable,” he reiterated a Buy rating as the CrowdStrike story “remains intact.”

“While we're certainly disappointed by these results, we believe CRWD’s cloud platform remains highly differentiated, its GTM is unrivaled, we're still confident the co. can very successfully extend beyond traditional endpoint security markets, and FCF margins remain ~30%,” Moskowitz told clients.

By Senad Karaahmetovic

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