Redburn Atlantic analysts downgraded CrowdStrike Holdings Inc. (NASDAQ:CRWD) and Palo Alto Networks (NASDAQ:PANW) in a note Thursday, citing valuation concerns and market dynamics.
CrowdStrike was downgraded to Sell from Neutral with a target price of $275, down from $380.
Redburn highlights that while CrowdStrike's products are of high quality, the company faces challenges in penetrating the large enterprise market to maximize cross-sell opportunities.
"CrowdStrike's consensus growth expectations do not reflect early indicators of a slowdown," the analysts noted.
They view the endpoint protection market as maturing, with other growth areas like cloud, identity, and security information event management (SIEM) being highly competitive.
Furthermore, the firm said that the stock's 45% year-to-date gain has placed it at a demanding FY1 EV/sales multiple of 23x, more than double the cyber peer group. Redburn believes this valuation "overestimates the extent to which IT budgets are going to expand for more cyber tools to protect an organisation at any cost."
For Palo Alto, Redburn downgraded the stock to Neutral with a target price of $325, down from $350.
The analysts expressed skepticism about the anticipated reacceleration in dollar growth from FY26 onwards following the company's 'platformisation' strategy announcement.
"While Palo Alto is exposed to the same optimisation and deflationary environment as CrowdStrike, we view Palo Alto more defensive as it is skewed to a sticker customer base and a wider moat," Redburn stated.
The current valuation of 15x FY1 EV/sales, while still a premium to its peers, offers a more balanced risk-reward scenario.
Overall, Redburn sees downside risk to current buy-side expectations for both companies, emphasizing caution amid competitive pressures and demanding valuations.