What happened
Shares of CrowdStrike Holdings (CRWD -0.68%) slumped 19.5% in May, according to data provided by S&P Global Market Intelligence. Weighing on the cloud-based cybersecurity stock were a slew of analyst price target reductions.
So what
Several analysts slashed their price targets on CrowdStrike last month due to the sell-off in the software space and over concerns of a potential slowdown in the economy. Mizuho analyst Gregg Moskowitz reduced his price target from $270 to $220 a share while maintaining his buy rating. Moskowitz cut his target to reflect the increasing uncertainty in the macroeconomic environment. However, he noted that overall demand for software remains good, especially for security products.
Image source: Getty Images.
Canaccord analyst T. Michael Walkley made a similar move, lowering his price target from $260 to $200 a share while keeping his buy rating. Walkley reduced his target because of the continued volatility in the sector, which is weighing on valuation multiples. However, he stated that he believes CrowdStrike deserves to trade at a premium given its growth and profitability metrics.
UBS analyst Roger Boyd also lowered his price target -- cutting it from $285 to $240 -- while keeping his buy rating. Boyd said he had some doubt about CrowdStrike's ability to compete in the cloud security space, though its integrated solution is a key differentiator in the sector.
Several other analysts also lowered their price targets last month ahead of the company's fiscal 2023 first-quarter results, which it reported in early June. Those numbers came in even better than analysts expected.
Overall, CrowdStrike's revenue surged 61% to $487.8 million, while subscription revenue vaulted 64% to $459.8 million. That pushed the company's annual recurring revenue to $1.9 billion, a 61% year-over-year increase. Meanwhile, cash flow from operations jumped 46% year over year to a record $215 million, while free cash flow grew 34% to a record $158 million. Those strong results led CrowdStrike to boost its revenue and profit guidance for its 2023 fiscal year.
Now what
Shares of CrowdStrike have fallen by about 40% from their peak last year as investors and analysts have grown less bullish on software stocks. However, the underlying business continues to perform well as demand for network security is rising due to increasing cyber threats. Because of that, last month's sell-off in CrowdStrike looks like an excellent opportunity for long-term investors to scoop up shares of this fast-growing cybersecurity stock at a lower price.
