On July 19th many of us woke up early in the morning to read about a global IT outage or the “blue screen of death” as many columnists called it. The outage was attributed to a software update by cybersecurity company CrowdStrike and affected many industries for a short period of time. Delta Airlines seems to be one of the most affected companies, having to cancel many flights.

Within a few days most of the issues had been resolved, but the stock price declined from about $343 to a low of about $217 by early August!

The sharp decline in price and valuation has investors begging the question if CrowdStrike is a buy the dip opportunity?

As a little bit of background CrowdStrike is a leader in Endpoint Security relying on real time information from customers networks and computers to detect and resolve attacks. CrowdStrike uses the network effect to prevent attacks on other clients.

Like Facebook, Instagram, or LinkedIn the network effect creates value for users and the company. If the network expands or shrinks the value for current and new customers can change too.

Investors are worried that the July 19th outage has caused new customers to wait and see how the issues would be resolved and prevented in the future. Wall Street analysts have incorporated this fear into their earnings and growth estimates already. As an example, Goldman Sachs reduced the sales growth for fiscal year 2026 to 18% from 29%.

For the stock to move higher investors will be looking for increased visibility on how sales growth can rebound back to 20%+ over the next few quarters.

Investing in times of uncertainty can present unusual value but with above-average risk. Prior to making an investment in CrowdStrike review your long-term goals and risk tolerance.

 

Written on August 27th, 2024

 

Beese Fulmer Private Wealth Management was founded in 1980 and is one of Stark County’s oldest and largest investment management firms.  The company serves high-net-worth individuals, families, and non-profits, and has been ranked as one of the largest money managers in Northeast Ohio.