JPMorgan analysts have removed CrowdStrike Holdings Inc. (NASDAQ:CRWD) from their Analyst Focus List following a recent IT outage caused by a Falcon content update file.
Despite maintaining an Overweight rating, analysts have adjusted their price target for CrowdStrike to $330 from the previous $400, reflecting anticipated headwinds in the near term.
The IT outage, which occurred on July 19th, initially damaged CrowdStrike’s reputation. However, JPMorgan noted that the company’s first-class response demonstrated strong incident management and transparency.
“Customers in the U.S. woke up on July 19th to news of an outage but also to a solution,” JPMorgan stated, emphasizing CrowdStrike’s swift recovery efforts and coordination with IT leaders and government agencies.
While the long-term outlook remains positive, with potential for CrowdStrike to strengthen its market position as a best-of-breed platform vendor, the short-term impact is significant.
JPMorgan expects the outage to lead to several headwinds, including credits to customers under service level agreements, delayed or lost business, and increased costs related to business interruption and recovery efforts. This has led to a 13% reduction in annual recurring revenue (ARR) estimates for this year, alongside lower profitability and cash flow projections compared to previous forecasts.
“Channel conversations we had before the outage occurred implied CrowdStrike was taking share and performing ahead of expectations for the quarter,” analysts noted.
However, post-outage discussions reflected increased uncertainty, with some deals delayed and partners still assessing the incident's impact on results for the quarter and momentum for the rest of the year.
JPMorgan’s model adjustments reflect a cautious outlook. Following a recovery period next year, JPMorgan anticipates a return to better ARR and revenue growth with normalized profitability and cash flow by CY26. Despite the setbacks, JPMorgan maintains an optimistic long-term perspective on CrowdStrike’s capabilities and market position.