On Wednesday, DA Davidson affirmed its positive stance on CrowdStrike Holdings (NASDAQ:CRWD), increasing the cybersecurity firm's price target to $395 from $310, while retaining a Buy rating on the stock. The adjustment follows CrowdStrike's financial results for the third quarter, which surpassed consensus expectations.
The company reported net new annual recurring revenue (NNARR) of $153 million, a 31% decrease year-over-year, but still ahead of the approximate $145 million anticipated by consensus. Despite this outperformance, the figure fell short of what some investors had hoped for. Management's commentary indicated an expected NNARR of roughly $170 to $195 million for the fourth quarter, which is notably below the consensus estimate of around $230 million.
The analyst noted that recent challenges, including an outage in July, are likely to continue affecting the company's short-term performance. However, the impact of Customer Commitment Packages has been in line with expectations. CrowdStrike's Gross Retention Rate (GRR) has remained stable at over 97%, and the company's Falcon Flex (NASDAQ:FLEX) offering is contributing to significantly larger deals.
Although acknowledging that near-term results may be volatile, DA Davidson remains confident in CrowdStrike's long-term prospects, leading to the raised price target. The firm's analysis suggests sustained confidence in the company's growth trajectory and market position.
In other recent news, CrowdStrike Holdings has demonstrated a robust performance in its third-quarter fiscal year 2025, surpassing the $1 billion revenue mark, a 29% increase from the previous year. The company's Annual Recurring Revenue (ARR) also saw a substantial rise, reaching $4.02 billion, marking a 27% growth from the previous year. Analysts from Mizuho (NYSE:MFG) Securities, Oppenheimer, Piper Sandler, and Truist Securities have all expressed confidence in CrowdStrike's prospects, maintaining positive ratings and price targets ranging from $375 to $410.
Despite facing challenges, CrowdStrike has managed to maintain strong gross retention and module adoption, with its Flex and financial services sectors driving increased module adoption and larger deal sizes. Analysts have acknowledged the company's ability to handle a challenging period effectively, highlighting the distinctiveness of CrowdStrike's cloud security platform and its successful expansion beyond traditional endpoint security markets.
CrowdStrike has updated its financial outlook for the full fiscal year 2025, raising its revenue and margin targets. The company anticipates accelerating net new ARR growth in the latter half of fiscal year 2026 and aims to reach $10 billion in ARR by fiscal year 2031. These recent developments underscore CrowdStrike's commitment to growth in the cybersecurity market.
InvestingPro Insights
CrowdStrike's recent financial performance aligns with several key metrics and trends highlighted by InvestingPro. The company's revenue growth of 33.07% over the last twelve months supports DA Davidson's optimistic outlook. This growth is particularly impressive given the current market conditions and reflects CrowdStrike's strong position in the cybersecurity sector.
InvestingPro Tips point out that CrowdStrike is trading at a high earnings multiple, with a P/E ratio of 515.09. This valuation suggests that investors have high expectations for future growth, aligning with the analyst's raised price target. Additionally, the company's strong return over the last year, with a 73.42% price total return, indicates robust investor confidence.
It's worth noting that CrowdStrike operates with a moderate level of debt and its liquid assets exceed short-term obligations, which provides financial flexibility as the company navigates near-term challenges mentioned in the article. These insights, along with 11 additional tips, are available on InvestingPro, offering a comprehensive view of CrowdStrike's financial health and market position.
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