CrowdStrike Holdings, a popular cybersecurity stock, saw its stock price fall by nearly 1% on Tuesday following a downgrade from an analyst. This caused a decline in investor sentiment, despite the broader market rising.
CFRA downgraded CrowdStrike stock from a “strong buy” to a “buy” and did not specify the reason or the current price target for the stock.
This downgrade came after Truist Securities analyst Joel Fishbein lowered his price target on the stock on Monday to $175 per share from $200, citing macroeconomic uncertainty and suggesting a more selective and conservative approach to stocks in the cybersecurity sector.
Risks of Owning Crowdstrike
Revenue: The company’s revenue is mainly derived from subscription services, which are especially at risk in a poor economic environment.
Dependence on Key Partners: The company’s top line could be at risk if critical resellers, distributors, and original equipment manufacturers gain too much negotiating power.
Cybersecurity Industry: The landscape it operates in is subject to rapid changes and threats, which could in turn hurt the firm’s offerings, as well as its growth and financial performance.
Financial: Management has a history of reporting significant losses and operating with negative cash flows. They may not be able to generate sufficient cash flow from operations, or access debt or equity capital if the bear market persists.
Crowdstrike vs Symantec: Who Will Win?
Crowdstrike faces stiff competition from Broadcom’s Symantec across key battlegrounds:
Products & services: Symantec has a broader portfolio of security products and services than CrowdStrike, making it more attractive to potential customers looking for a one-stop-shop for all their security needs.
Stronger partnerships: The larger firm, AVGO, has a long history of partnering with leading organizations, which could give it an edge over CrowdStrike in terms of access to resources, expertise, and market opportunities.
Less-pricey Solutions: Symantec has the opportunity to offer more cost-competitive solutions to customers, which could drive more demand for its services.
Focus: Broadcom’s cybersecurity division has a better foothold in verticals such as healthcare and government, which may attract more customers in those specific areas.
In spite of these threats, CrowdStrike has grown rapidly since it was founded, and has been able to gain market share with its technology-first approach to endpoint security.
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