Still, CrowdStrike shares have increased more than 40% this year, after a 34% rise in 2024.
Almost a year has passed since the problematic cybersecurity update from CrowdStrike, which crippled airlines, banks, media, and hospitals for hours. The company is still facing the consequences.
There was a worldwide tech failure tied to the Microsoft Azure cloud platform and a software problem at CrowdStrike, which impacted companies from many sectors.
The issue was caused by computers running the Windows operating system and the CrowdStrike software. In response, CrowdStrike announced that it will work with affected customers and has implemented a fix for the issue, which originated from an update it rolled out for Windows users.
CrowdStrike offers cloud-based security solutions to companies. It’s Falcon tool, which was one of the reasons for the outrage, identified unusual activity and vulnerabilities to protect computer systems from threats like malware.
It operates in over 170 countries and was founded in 2011, with its headquarters based in Austin, Texas. It has more than 7900 employees.
Some of the world’s largest tech companies, such as Alphabet’s Google, Amazon, and Intel, are its clients, with a total of around 29000 customers across the globe.
Its influence spans multiple industries, serving clients like retail giant Target, Formula One team Mercedes-AMG PETRONAS, and the US government. It goes head-to-head with companies like Palo Alto Networks, Zscaler, and Fortinet.
After the worldwide tech failure, its shares dropped nearly 12% in premarket trading. It held a market value of $83.5 billion, with its stock price rising 34%, according to data from the London Stock Exchange Group (LSEG).
In comparison, Palo Alto Networks’ stock has climbed about 10% year-to-date and has a market capitalization of $104.87 billion.
The company revealed that US regulators have about specific transactions, along with the outage on July 19. It has previously been projected that its second-quarter income will fall below expectations, partly due to the customer retention incentive program made after the outage. Its shares decreased by over 5% after the afternoon trading.
The incentive program ended in the fourth quarter, but it continues to impact subscription growth, as it allowed customers to pick more products or extend their usage. The incentives reduced first-quarter income by around $11 million and are expected to have a $10 million to $15 million impact each quarter for the remainder of the year.
The situation shows that there are lingering repercussions from the Windows outage, which has damaged CrowdStrike’s brand image and led to lawsuits, including one from Delta Air Lines, which was seeking compensation for canceled flights.
Still, CrowdStrike shares have increased more than 40% this year, after a 34% rise in 2024. This performance has resulted in high valuation, with shares trading at 123.69 times forward earnings estimates, compared to Palo Alto Networks’ 54.01 times.
The steep valuation leaves little to no room for any unexpected issues, according to Russ Mould, investment director at AJ Bell.
Stocks like CrowdStrike, which have strong momentum, need to generate positive earnings surprises to maintain their upward trajectory in share prices, he added.
The company appeared to have incurred a loss of nearly $6 billion, reducing its market value to about $ 116 billion. It reported a loss for the first quarter on Tuesday, compared to the profit it earned the previous year.
However, many analysts remarked that the company was trying out many strategies to restore its reputation and attract new clients in the competitive market, which were showing positive results.
At least 23 brokerages have increased their price targets after the company reported in-line first-quarter income and better-than-expected adjusted profit per share. Truist Securities stated that it is gradually increasing its market share through its diverse product offerings.