Shares of embattled cybersecurity company CrowdStrike (CRWD 0.11%) crashed on Monday because Friday's incident is still in the spotlight. Various analysts downgraded their near-term expectations for the company from here, which might not be an overreaction. As of 10:15 a.m. ET, CrowdStrike stock was down 12% for the day and it's now down more than 30% from its all-time high hit earlier this month.
The analyst downgrades are here for CrowdStrike
On Friday, CrowdStrike updated its cloud-based software. But the update had a defect that caused an estimated 8.5 million Microsoft Windows devices to stop working, impacting financial institutions, airlines, and more. The stock obviously dropped on Friday as investors assessed the situation. But today Wall Street analysts are formally expressing their thoughts.
NASDAQ: CRWD
Key Data Points
Wells Fargo analyst Andrew Nowinski lowered his price target for CrowdStrike stock today in expectation of higher legal fees in the near future, among other things, according to Investing.com. Guggenheim analyst John DiFucci lowered his price target because he expects potential customers to be reluctant to sign new deals for a while, until there's greater certainty that CrowdStrike won't make a mistake as big as the one it made last week.
Investors today are responding to the universally cautious tone from Wall Street.
Are the analysts right?
In short, the analyst community is expressing very valid concerns for CrowdStrike stock right now. For cybersecurity stocks, one of the biggest risks has always been reputational risk from a single failure. Over the last few years, the company has seemed unstoppable as it won new customers and as existing customers continue to add on new software modules, boosting both revenue and free cash flow. But it was still susceptible to this risk.
CrowdStrike isn't necessarily done -- I think that would be an extreme overreaction. It's important to note that the company's failure was a software defect, not a failure to defend against a cyberattack, which is key. But it still may take a while for the business to fully move past knocking down that many Windows systems last week. Therefore, Wall Street is being reasonable by lowering price targets today.
