stock has room to rise even if customers are taking longer to make decisions about purchases, according to Daiwa Capital Markets.
Daiwa analyst Stephen Bersey upgraded shares of CrowdStrike (ticker: CRWD) to Buy from Outperform but lowered his 12-month target for the price to $181 from $193. Bersey cited strong quarterly results and “good cost control” as reasons for the upgrade.
At the end of November, the cybersecurity company turned in higher earnings and revenue than expected for its third quarter. It had a record number of new customers contributing at least $1 million in annual recurring revenue.
Still, the total net gain in ARR was lower than management expected, the company said, “as increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates, which delays ARR recognition until future quarters.”
CrowdStrike forecast significantly less revenue than analysts expected, triggering a slide in the stock.
Cloud stocks in general have been struggling recently because corporate demand seems to be weakening.
(CRM), another cloud-based software company, forecast less revenue than expected for its January quarter. Management said that they have begun to see a “more challenging buying environment.”
Despite CrowdStrike’s downbeat commentary and revenue forecast, the quarterly earnings and revenue numbers gave Bersey enough reason to upgrade his rating on the stock. The “solid quarter puts full fiscal year on solid foundation,” he wrote in a research note.
“We are significantly raising our non-GAAP earnings estimates for 2023 and
2024, due to our view of better operating margins driven by good cost
control,” Bersey said. For 2023, Bersey now anticipates non-GAAP operating margins to be 16.5%, up from the 15% he had predicted. He forecast 2023 per-share earnings of $1.50, up from his prior call of $1.34.
For 2024, Bersey expects non-GAAP operating margins to be 17.1%, up from his prior estimate of 14.1%. He also anticipates earnings of $1.99 a share for the year, compared with the $1.64 he had predicted.
Shares of CrowdStrike were down 2.5% Monday to $120.93, while the
had lost 1.1%. The stock has fallen 41% this year.
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