Four Wall Street brokerages on Friday upped their price targets on CrowdStrike Holdings ahead of the cybersecurity firm's third quarter earnings report on Nov. 26. CrowdStrike stock has gained 40% in 2024 as shares rebound from a global IT outage in July.
JPMorgan, KeyBanc Capital Markets, Jefferies and Baird hiked CrowdStrike stock price targets on Friday. RBC Capital, Truist, Barclay and Morgan Stanley upped their price targets earlier in the week.
CrowdStrike Stock: ARR Key Metric To Watch
"Results for Q3 could be much better than some anticipate," said JPMorgan analyst Brian Essex, in a report. "This is the first full quarter following the July 19 outage. We expect we will see a material impact from the company's sales pause following the outage, in addition to the impact of accommodations offered through CrowdStrike's Customer Commitment Packages (CCP)."
He added: "We expect growth, margins, and cash flow will reflect the greatest pressure this quarter, with fundamentals improving the farther we move away from the date of the outage."
The key financial metric for investors heading into the CrowdStrike earnings report will be subscription-based annual recurring revenue (ARR). Analysts polled by FactSet estimate ARR of $4.01 billion for Q3, up 27% from a year earlier and 4% from the June quarter.
"We believe CrowdStrike is capable of growing ARR in the mid-20s% over the medium term," said KeyBanc Capital analyst Eric Heath in a report.
Amid the IT outage, analysts expected lower growth for "net new" ARR because of delays in signing contracts and expectations that many customers will seek price discounts when renewing contracts to help cover the cost of business disruptions.
CrowdStrike's negotiations with customers over pricing concessions are expected to play out through 2025 and perhaps beyond.
Jefferies analyst Joseph Gallo said in a report: "The biggest question for CRWD this quarter is will investors even care about Q3/Q4 potential softness as long as the long-term ARR trajectory remains on course. We believe the next major catalyst for shares remains opening fiscal 2026 guidance, which will not be provided until March."
He added: "For fiscal 2026, consensus ARR of $5.1B implies growth of 21% year-over-year versus 23% in fiscal 2025."
On Friday, CrowdStrike stock rose 4% to close at 372.26.
$1 Billion In Quarterly Revenue In Sight
CrowdStrike earnings for the October quarter are expected to fall 1% to 81 cents with revenue rising 25% to $983 million. The company is on track to report over $1 billion in revenue for the first time in the January quarter.
When reporting July quarter financial results, CrowdStrike cut guidance due to the global IT outage, caused by a faulty software update. CrowdStrike's software update required access to Microsoft's operating system. The two companies have been cooperating to prevent future incidents.
Delta Air Lines, which took a one-time, 45-cent hit to September quarter earnings tied to the IT outage, has sued CrowdStrike seeking reimbursement for damages.
Further, CrowdStrike competes with Palo Alto Networks, SentinelOne, Microsoft and others in the "endpoint" market. Endpoint security tools detect malware on laptops, mobile phones and other devices that access corporate networks.
Also, CrowdStrike is building a broad, threat-detection cybersecurity platform called XDR, or extended detection and response. It monitors endpoints as well as web/email gateways, web application firewalls and cloud business workloads.
Meanwhile, CRWD stock is among cybersecurity stocks to watch.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
