Guggenheim analysts downgraded CrowdStrike (NASDAQ:CRWD) to Neutral from Buy, citing concerns over the company's ability to secure new deals in the near future. This comes in the wake of a recent quality assurance issue that disrupted IT systems on a global scale, which resulted in an 11% stock price drop on Friday. Currently, the stock is down more than 5% in pre-market.
The investment firm also highlighted potential risks in the fourth-quarter consensus estimates, especially regarding annual recurring revenue (ARR). Given that CrowdStrike's stock trades at the highest multiple of recurring revenue within Guggenheim's entire software coverage, the analysts decided to take a step back for now.
CrowdStrike has significantly broadened its technology portfolio, now offering 28 modules, and has aggressively pursued new markets, thereby enhancing its next-generation endpoint security capabilities. This expansion has resulted in industry-leading gross retention rates and renewed growth.
However, the recent global IT disruptions attributed to CrowdStrike are expected to have a temporary but negative impact on its business operations. According to analysts, the company's reputation may take some time to recover, which will likely affect new business signings in the near term.