CrowdStrike’s valuation now ’looks full’ says Morgan Stanley

Investing.com -- Morgan Stanley downgraded CrowdStrike (NASDAQ: CRWD) to Equal-weight from Overweight in a note Monday, cautioning that the cybersecurity firm’s shares "look full" following a sharp rally.

“Stepping to the sidelines given full valuation after ~50% run and rising growth expectations,” the bank’s analysts wrote.

They added that CRWD is “still a compelling long-term story, but the second half acceleration we expect now looks well priced in the shares.”

Morgan Stanley raised its price target slightly to $495 from $490 but said three key factors now balance CrowdStrike’s near-term risk/reward profile.

First, valuation. The analysts noted that “the current 21x EV/2026E Sales multiple presents a sizable premium to the large cap software peer average at 12x,” even when adjusting for growth.

“This premium persists even when adjusted for growth rates (1.0x EV/S/G vs. 0.8x),” they wrote.

Second, investor expectations are already running high. CrowdStrike’s first-quarter results “beat consensus net new ARR expectations by 11%,” yet the stock fell in after-hours trading.

With the stock up 50% over the past three months, the analysts warned, “a similar situation may unfold during the Q2 print in late August.”

Third, Morgan Stanley sees “a lack of near-term catalysts,” with limited visibility into the impact of CrowdStrike’s Customer Commitment Package (CCP) renewals and Falcon Flex (NASDAQ: FLEX) contracts.

While Flex contracts have gained momentum, the analysts warned they could pose a risk if “customers do not renew all of their credits.”

“Bottom line,” Morgan Stanley concluded, “though positive on the longer-term growth potential, with a more balanced risk/reward we are moving to the sidelines awaiting better entry points to build positions.”

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