What happened
CrowdStrike (CRWD +2.13%) stock fell 11.5% across this week's trading. The cybersecurity specialist's share price lost ground in conjunction with the company's third-quarter earnings release, despite results in the period being quite strong.
NASDAQ: CRWD
Key Data Points
CrowdStrike posted non-generally-accepted-accounting-principles (non-GAAP) (adjusted) earnings of $0.40 per share on revenue of $581 million in Q3, while the average analyst estimate had called for per-share earnings of $0.31 on sales of $574 million in the quarter. Even though the business posted top- and bottom-line beats in the period and raised its earnings outlook for the current fiscal year, management's guidance for the next fiscal year spooked the market and prompted big sell-offs for the stock.
So what
CrowdStrike delivered a beat-and-raise quarterly report when it released earnings on Nov. 29. But guidance for annualized recurring revenue and subscription revenue growth to dip into low-30s and low- to mid-30s percentage rates, respectively, next fiscal year caused a substantial valuation pullback.
Now facing a tougher macroeconomic backdrop, the company is seeing some smaller customers cut back on spending and some larger customers shift renewal cycles further out. And the resulting growth deceleration is making investors less confident in the cybersecurity specialist's stock.
Now what
CrowdStrike is guiding for sales to come in between $2.223 billion and $2.232 billion for the current fiscal year -- good for growth of roughly 53.6% annually at the midpoint of the target. With the company's recent commentary suggesting sales growth will drop significantly from that level in the next fiscal year due to the more challenging macroeconomic backdrop, the market has become more cautious about the stock.
On the other hand, CrowdStrike's leadership position in the endpoint cybersecurity market seemingly has the company on track for strong growth over the long term. While near-term headwinds and market volatility could continue to shape the stock's trading in the near term, the company continues to look well-positioned in its industry, and I think recent sell-offs present a worthwhile buying opportunity.
