What happened
Shares of CrowdStrike Holdings (CRWD +1.11%) stock tumbled in afternoon trading on the Nasdaq Monday after three separate Wall Street analysts all suddenly cut their price targets on the cybersecurity specialist.
As of 3 p.m. ET, CrowdStrike stock is down 5.5%.
Image source: Getty Images.
So what
That three separate analysts would decide to lower price targets on CrowdStrike isn't remarkable in and of itself. That they'd all decide to cut their price targets almost simultaneously, and within an hour of each other this morning, on the other hand, is a bit curious. In swift succession, first Morgan Stanley cut CrowdStrike to $180 a share, then RBC Capital Markets cut to $250, and then Stifel Nicolaus cut its target, too, likewise to $250.
Of the three ratings, Morgan Stanley's is the most interesting. Not only does it have the lowest price target, but Morgan Stanley was also the only one of the three analysts to call CrowdStrike stock an out-and-out sell, rating the stock underweight. In a note covered by TheFly.com, Morgan Stanley warned that while CrowdStrike seems to be enjoying a "favorable ... consistent, demand environment," and is gaining customers, the "average deal size" of the work it is bringing in is smaller, resulting in less revenue growth than others on Wall Street may be anticipating.
RBC and Stifel, on the other hand -- both of which rate CrowdStrike a buy -- are optimistic about the company despite cutting their price targets. RBC thinks fourth-quarter earnings will be "strong" this week, and Stifel says the company is still "in the early days" of its growth cycle.
Now what
Speaking of earnings, CrowdStrike is due to report its Q4 2021 earnings numbers on March 9. On average, Wall Street analysts forecast 55% revenue growth to $410.9 million, and similar 54% growth in earnings to $0.20 per share.
Sadly, that's a pro forma number, however. When calculated according to generally accepted accounting principles (GAAP), analysts have CrowdStrike down for a likely $0.17-per-share loss for the quarter. For that matter, most analysts think CrowdStrike will keep losing money through at least 2024, and only turn profitable in 2025 at the earliest.
Viewed in that light, perhaps today's negativity on CrowdStrike stock won't seem so surprising.
