Shares of CrowdStrike Holdings Inc. saw a sharp decline of 12% following a significant global outage at Microsoft that has caused disruptions across multiple sectors, including aviation, finance, retail, and banking. The outage, which began around 6 PM ET on Thursday, has severely affected Microsoft’s cloud operations, resulting in widespread issues.
Users worldwide are encountering the infamous Blue Screen of Death (BSOD) on their Windows devices, leading to unexpected shutdowns and restarts. The critical error message, “Your PC ran into a problem and needs to restart. We’re just collecting some error info, and then we’ll restart for you,” has caused data loss and interruptions for millions.
In addition to the technical disruptions, CrowdStrike faced a downgrade from Redburn Atlantic. The investment firm downgraded CrowdStrike from Neutral to Sell in a report released on Thursday, reducing its target price for the cybersecurity company from $380 to $275. Redburn cited concerns about the company’s valuation and market dynamics as key reasons for the downgrade.
Despite acknowledging the high quality of CrowdStrike’s products, Redburn emphasized the challenges the company faces in penetrating the large enterprise market and maximizing cross-sell opportunities. Analysts noted that the consensus growth expectations for CrowdStrike do not account for early signs of a potential slowdown.
The report further pointed out that the endpoint protection market is becoming saturated, with intense competition in growth areas such as cloud, identity, and security information event management (SIEM).
Redburn criticized CrowdStrike’s current valuation, noting that its 45% gain year-to-date and demanding FY1 EV/sales multiple of 23x significantly exceed those of its cybersecurity peers. They believe this valuation overestimates the extent to which IT budgets will expand to cover additional cybersecurity tools.
As the fallout from the Microsoft outage continues to unfold, the impact on CrowdStrike highlights the interconnected nature of the tech industry and the challenges companies face in navigating market dynamics and investor expectations.
