What happened
Shares of cybersecurity company CrowdStrike Holdings (CRWD 0.13%) were falling today following the Federal Reserve's decision yesterday to hike the federal funds rate by an additional 75 basis points.
The tech stock was down by 5.1% as of 1:58 p.m. ET.
So what
High-growth technology stocks are especially vulnerable to the Fed's decision as an increase in interest rates makes it more expensive for companies to borrow money.
Image source: Getty Images.
Rising interest rates have also caused Treasury yields to rise. When Treasury yields go up, a company's future cash flows are worth less than they would have been if rates had remained lower.
CrowdStrike investors are processing all of this today and are likely increasingly concerned that the Federal Reserve's aggressive rate hikes could end up spurring a recession.
Despite those worries, CrowdStrike's results for the fiscal second quarter (which ended on July 31) proved the company has been financially resilient so far. CrowdStrike beat Wall Street's consensus estimates for both the top and bottom lines and even raised its full-year guidance -- which is nearly unheard of among most tech stocks right now.
Now what
The Fed's recent interest rate hike overshadowed an analyst's latest buy rating for CrowdStrike. MoffettNathanson analyst Sterling Auty initiated coverage of CrowdStrike today with a buy rating and a $280 price target -- a significant upside from the company's current share price of $161.
But investors appear to be focused on recession worries right now. The Federal Reserve said that it expects to continue raising rates into 2023, which has left CrowdStrike investors -- and the market in general -- worried that the Fed could end up tipping the U.S. economy into a recession.
