Crowdstrike Holdings, Inc – Are shares finally a buy after a 30%+ drop?
A 30%+ decline from recent highs, solid financial results, but also still trading at incredibly high valuation multiples. Is it time to buy CRWD shares?
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Introduction
Last week, on March 4, Crowdstrike released its fourth quarter earnings report, which couldn’t really count on a positive reception by investors, with CRWD shares down a whopping 20%+ since.
Arguably, this decline was mostly driven by poor sentiment toward technology stocks over recent weeks, although the leading cloud-native cybersecurity provider also didn’t deliver an entirely clean report. This was mostly due to its short-term profit outlook falling short of expectations amid heightened technology investments.
As it does regularly, I believe this is one of those typical moments when the market and investors overreact to soft guidance without considering the underlying dynamic and management’s commentary. The market simply doesn’t seem to care and wants to see results.
Granted, at over 20x sales and an earnings multiple of around 80x, there isn’t much room for any flaws, with expectations insanely high. From that standpoint, the drop didn’t come out of nowhere, leading to a much-needed share price and valuation reset.
After last week’s drop, Crowdstrike shares are now down more than 30% since hitting an all-time high in mid-February. This finally brings valuation multiples somewhat down to earth, though still leaving shares far from cheap.
Is the premium still justified? Are shares a good buy after last week’s reset? Or should we wait for a further slump in share price?
In order to answer these questions, let’s delve into the Q4 earnings to get a good sense of how this business is doing before moving to the outlook and current valuation.
Let’s delve in!
