Crowdstrike Stock Earnings Preview: Bullish analysts lower CRWD price targets ahead of Tuesday’s Q3 results

• CrowdStrike is set to release FQ3 earnings after Tuesday’s close.
• Wall Street expects $0.32 in adjusted EPS on revenue of $575 million.
• CRWD stock has lost about 30% YTD, right in line with NASDAQ.
• CrowdStrike has beaten earnings/revenue consensus in 14 straight quarters.

 

Wall Street analysts covering CrowdStrike (CRWD) still remain more bullish on this digital security name among all others, especially in the lead-up to Tuesday’s afterhours release of Q3 results, but the last three updates have all involved cuts to price targets. RBC Capital once again reiterated its Outperform rating on the beloved pandemic stock on Monday but cut its price target from $236 to $200. 15% price target trims are somewhat unusual for uniformly favored Wall Street stocks like CrowdStrike, but the $200 target still gives CRWD shareholders 43% upside. 

CrowdStrike stock earnings news: CRWD price targets keep dropping

Before RBC Capital’s price cut, Morgan Stanley did the same on November 22, cutting their target from $217 to $190. On November 18, Barclays trimmed their target from $225 all the way to $180. Despite either major pullback, both banks retained their Overweight rating on CRWD stock.

Heading into third quarter results, none of these analysts are really giving any company-specific negative reasoning behind their cuts. Instead, price targets are simply moving closer to the current price around $140, as analysts admit that the macro outlook involving higher interest rates being sustained through 2023 will have the tendency of keep valuation multiples subdued. Currently, CRWD stock is trading for approximately 17.5 times revenue, which is quite high compared with many other tech stocks that have fallen below 10x during 2022’s haemorrhaging market. This makes it awfully hard to call it cheap, but the current average Wall Street price target still remains $231.62.

With those high expectations in mind, Wall Street consensus for Tuesday’s post-market CrowdStrike results are $0.32 in adjusted earnings per share (EPS) on the back of $575 million in revenue. In terms of GAAP EPS, consensus drops to $-0.25 per share. A total of 25 analysts have raised EPS guidance on the quarter in the past 90 days. Just one has cut the outlook.

Longtime observers will note that Crowdstrike has not missed consensus in 14 straight quarters. This included both earnings and revenue projections. CrowdStrike has achieved so much loyalty among growth stock investors, because it constantly grows sales at a healthy rate. As shown in the image below, YoY revenue growth has dropped from 85% during the pandemic to more than 58% in the most recent quarter. This is to be expected as Crowdstrike matures but remains much better than many of its peers. Palo Alto Networks (PANW) jumped 10% after reporting its mid-November results, and its revenue grew at just 25% YoY, albeit at a much higher level than CrowdStrike.

CrowdStrike revenue growth / Source: SeekingAlpha.com

 

The $575 million consensus revenue figure would just be 47% YoY growth, so it would seem that Wall Street is handing CrowdStrike any easier bar to beat. Wall Street will also be watching to see if Crowdstrike can retain its +30% free cash flow margin and its +120% dollar-based net retention rate. Lastly, management needs to confirm full-year revenue topping $1.8 billion.

In a recent client note, Morgan Stanley addressed the slowing growth in the cybersecurity industry but stated that CrowdStrike seemed to be immune.

"The biggest estimate cuts in [Q3] were from smaller companies selling predominantly point products, in our view," Morgan Stanley analysts said. "This aligns with our general preference for leaning into consolidators [...] Palo Alto Networks (PANW) and CrowdStrike (CRWD)."

CrowdStrike stock forecast

Despite all the positivity surrounding Crowdstrike earnings, the stock has been faring poorly for some time. CRWD stock is down 30% year to date and 14% in the past month. Unlike other high-multiple growth stocks though, Crowdstrike stock is trading right in line with the NASDAQ’s year to date performance. The CRWD share price has largely been trading lower since it produced the second peak of a double-top pattern back on August 25. 

The 9-day moving average remains below the 21-day moving average, which means CrowdStrike stock is still in a bearish rut at the moment. A major beat could see shares head north of $150, but there they would likely run into the top descending trendline that has stopped bulls for the past three months. A major miss could send CRWD stock down to a host of nearby support levels. Both $137 and $130 worked as support back in May and again on several occasions here in November. Below there sits $120.50, which held up two sessions in a row on November 8 and 9. 

CRWD 1-day chart