CrowdStrike’s post-earnings stock drop is a buy. Here’s why sellers have it
CrowdStrike delivered a very good quarter after Tuesday’s closing bell, with management raising its full-year outlook on sales, operating income, and earnings. Nonetheless, shares of the cybersecurity firm were selling off as traders booked profits, perhaps because the current quarter profit guide came in a penny below expectations. The stock drop plays right into our hands. Revenue during CrowdStrike’s fiscal 2025 third quarter increased 29% year over year to $1.01 billion, beating the consensus estimate of $928 million, which was compiled by LSEG. It marks the first time quarterly revenue exceeded the $1 billion milestone. Adjusted earnings per share advanced 13% to 93 cents in the three months ended Oct. 31, ahead of EPS estimates of 81 cents, LSEG data showed. Annual recurring revenue jumped 27% to $4.02 billion, also ahead of the $4.01 billion estimate, according to FactSet. This is the first time ARR has surpassed $4 billion in a quarter. Remaining performance obligation surged 46% year-over-year to $5.4 billion, easily outpacing the $5.08 billion consensus estimate compiled by FactSet. CRWD YTD mountain CrowdStrike YTD CrowdStrike shares sank more than 5.5% in after-hours trading following the print. The move was right in line with Jim Cramer’s commentary on Sunday that investors should give thanks to shortsighted traders who provide opportunity after opportunity for those like us with a little patience and a willingness to do the homework to win over the long-term. Bottom line After going over the results, hearing from the team on the call, and seeing the stock reaction, we collectively have another reason to give thanks because you would have to be a shortsighted hot money trader to sell shares Tuesday evening. We are, therefore, reiterating our buy-equivalent 1 rating and increasing our price target to $400 per share from $350. CrowdStrike CEO George Kurtz noted on the earnings press release that the company has realized a gross retention rate of over 97%, an important factor given investor concerns about customers leaving the platform following a botched software update back in July that caused a global IT outage. Since the glitch, Kurtz and his team have put on a master class in addressing the company’s misstep — and as the fiscal third-quarter results show, it appears to be resonating with customers. On the post-earnings call, Kurtz said the company set a “new record of $1 million dollar plus transactions, closing more than 260 this quarter, equating to an average of four or more million dollar plus deals every business day.” The team highlighted strong “module adoption rates,” which CrowdStrike defines as the “total number of customers with five or more, six or more, seven or more, and eight or more modules, respectively, divided by the total number of subscription customers.” That excludes Falcon Go customers. Essentially, this metric is used to demonstrate that when customers come to CrowdStrike’s Falcon platform, they tend…
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