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Why CrowdStrike Stock Is Crashing Ahead of Earnings

By Rich Smith - Dec 2, 2020 at 2:49PM

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Earnings are due out in just a couple of hours.

What happened

Things are not looking good for CrowdStrike's ( CRWD -5.88% ) upcoming earnings report. In just a couple of hours, at 4 p.m. EST this evening to be precise, the cybersecurity company is scheduled to report its financial results for fiscal Q3 2020. The fact that Mr. market is selling off the stock ahead of this report, however, suggests that more than a few investors are nervous about what CrowdStrike might report.

As of 2 p.m. EST, two hours before the event, CrowdStrike stock is retreating 4.2%.

Rising and falling stock arrow under a magnifying glass revealing a big red question mark

Image source: Getty Images.

So what

Are investors right to worry? Not according to Wall Street. The latest published estimates from analysts covering CrowdStrike predict the company will erase last year's Q3 loss and turn in at least breakeven profits for Q3 2020. Sales are expected to surge 70% to $212.6 million for the quarter. 

Analysts are so optimistic about CrowdStrike's report, in fact, that on Monday, no fewer than three separate investment banks -- Barclays, Needham & Co., and RBC Capital -- all raised their price targets on the stock and to as high as $190 a share!

(Hint: CrowdStrike stock currently costs just a bit more than $140. So those analysts are forecasting as much as a $50 gain per share. That's over the course of the next 12 months, but still!)

Now what

Will these analysts end up with egg on their faces at 4 p.m.? Perhaps -- but not for lack of effort or failure to research their stock pick.

Heading into earnings, Barclays conducted "channel checks" that confirmed CrowdStrike's sales gains were "positive" for the quarter and suggested the company may be stealing business from Symantec. RBC conducted its own checks and thinks earnings will be "strong" in Q3, featuring "durable growth and margin expansion." And Needham -- coming in above all the rest with its $190 price target -- predicts a "strong beat and raise quarter" for CrowdStrike, implying we could even see an honest-to-goodness profit out of CrowdStrike. 

One way or another, we'll know the answer in just a couple of hours. Stay tuned.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

CrowdStrike Holdings, Inc. Stock Quote
CrowdStrike Holdings, Inc.
$197.05 (-5.88%) $-12.30

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