Tuesday, Deutsche Bank (ETR:DBKGn) adjusted its price target on CrowdStrike Holdings (NASDAQ:CRWD) shares, a leader in cloud-delivered endpoint and workload protection, to $285 from the previous $275 while maintaining a Hold rating on the stock. The decision followed CrowdStrike's second quarter fiscal year 2025 results, prompting the firm to update its financial model for the company.
The updated model reflects adjustments to CrowdStrike's revenue forecasts for fiscal years 2025 and 2026, now set at $3.896 billion and $4.625 billion, down from previous estimates of $3.921 billion and $4.529 billion, respectively.
Free cash flow (FCF) projections were also revised to $1.092 billion for FY25 and $1.294 billion for FY26, a decrease from the earlier forecasts of $1.158 billion and $1.412 billion.
The price target increase to $285 is derived from a discounted cash flow (DCF) analysis, which incorporates a weighted average cost of capital (WACC) of 9.3%, a terminal risk-free rate of 4%, an equity risk premium of 5.25%, and a long-term growth rate of 3.5%, in line with GDP growth. This valuation implies a 57x calendar year 2025 enterprise value to unlevered free cash flow (EV/uFCF) multiple.
Deutsche Bank's analyst highlighted several factors that could affect CrowdStrike's stock value. Upside risks include the market's potential underestimation of CrowdStrike's core market opportunities, the company's ability to defend its position in enterprise accounts, and robust net new annual recurring revenue (NNARR) growth driven by customer adoption of the Falcon platform.
Conversely, downside risks involve challenges such as the company's ability to compete with incumbent endpoint protection platform (EPP) vendors, stronger competition from other major players in the cloud, identity, and security information and event management (SIEM) markets, and the financial impact of concessions to customers affected by service outages.
In other recent news, CrowdStrike Holdings has been the focus of numerous analyst adjustments following their second-quarter results and revised future financial guidance. The cybersecurity firm reported a robust 32% growth in both revenue and Annual Recurring Revenue (ARR), with strong performance in areas such as Cloud, Identity, and Next Generation Security Information and Event Management (SIEM). However, due to a recent IT incident, the company adjusted its full-year revenue forecast down by approximately $100 million.
Analyst firms including Argus, TD Cowen, BMO Capital Markets, and Canaccord Genuity have made adjustments to their price targets for CrowdStrike.
Argus reduced its target to $325 but maintained a Buy rating, while TD Cowen lowered the price target to $380. BMO Capital Markets increased the firm's price target to $315, and Canaccord Genuity lowered its target to $330, both maintaining positive ratings on the stock.
Piper Sandler held steady with an Overweight rating and a target of $290, expressing confidence in the resilience of CrowdStrike's platform despite the recent outage.
These recent developments, including the adjusted revenue forecast, are expected to impact CrowdStrike's financials into the first half of fiscal year 2026. Despite these challenges, the firm continues to receive positive feedback for its Falcon platform.
InvestingPro Insights
Following Deutsche Bank's recent price target update on CrowdStrike Holdings, data from InvestingPro provides additional context for investors considering the company's financial standing and market valuation. With a hefty market capitalization of $67.97 billion, CrowdStrike trades at a high earnings multiple of 403.22, reflecting significant growth expectations from the market. Despite the high valuation, the company holds more cash than debt on its balance sheet, which is a positive sign of financial stability.
InvestingPro Tips highlight that CrowdStrike's net income is expected to grow this year, aligning with the analyst's outlook for the company's future financial performance. Moreover, CrowdStrike's strong return over the last year, with a 71.98% price total return, indicates robust investor confidence, which may continue if the company maintains its growth trajectory. It's worth noting, however, that 36 analysts have revised their earnings downwards for the upcoming period, suggesting that there may be some concerns about future profitability.
For investors seeking a deeper dive into CrowdStrike's financials and future prospects, InvestingPro offers additional tips and data points, including a comprehensive analysis of valuation multiples and profitability metrics. With these insights, investors can make more informed decisions about the potential risks and rewards associated with investing in CrowdStrike.
Interested readers can explore further by visiting InvestingPro for a total of 16 tips on CrowdStrike's financial health and market performance. The platform offers an in-depth perspective that complements the analysis provided by Deutsche Bank's latest report.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.