- CrowdStrike has fallen into disfavor as a result of the US Federal Reserve’s rate hike
- CRWD has fallen 23.9% year-on-date due to the ongoing divestment of highly rated growth stocks
- In the short term, there is a risk of further price losses due to the uncertain macroeconomic outlook
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It is currently heading for the worst year since 2008 and has lost 29% in value so far in 2022. This is due to a toxic cocktail of rising interest rates, accelerating inflation and declining growth that has prompted a move away from highly overvalued technology stocks.
Companies in the software industry have been among the hardest hit by this trend so far this year. This can be seen in the sector’s two top ETFs, which in the same period performed worse than comparable returns on the NASDAQ.
First Trust Cloud Computing ETF (NASDAQ 🙂 and Global X Cloud Computing (NASDAQ 🙂 have fallen by 37.6% and 38% respectively this year.
Despite the advanced stage of the divestment, we believe that CrowdStrike’s share is vulnerable to further losses in the current environment.
- Year to date performance: -23.9%
- Distance to ATH: -47.7%
- Market value: $ 36.3 billion
The cyber security specialist CrowdStrike (NASDAQ 🙂 was listed in June 2019. Since then, the provider of endpoint protection cloud providers has experienced some turbulence. Fears over the US Federal Reserve’s aggressive rate hike plans triggered a brutal landslide in many highly rated technology companies.
After hitting a record high of $ 298.48 in November 2021, CRWD shares quickly fell to a low of $ 130.00 on May 12th.
Since then, while CrowdStrike shares have caught some losses to close at $ 157.21 on Thursday, they are still around 48% from their record highs.
At current stock prices, the security software maker, which recently moved its headquarters from Sunnyvale, California, to Austin, Texas, has a market value of $ 36.3 billion.
Headwind # 1: Bold rate hikes
While CrowdStrike should benefit from more growth factors over the coming years, investors should prepare for further losses in the short term as the Federal Reserve is engaged in an aggressive tightening cycle to combat the towering high.
Rising and high inflation weighs on high-multiple high-growth tech stocks, as their profits will be worth less in the future than they are today with rising interest rates and high inflation.
And if the Fed raises interest rates too quickly and the economy slips into recession, growth in corporate cyber-software spending could slow.
Headwind # 2: The stock is still not cheap enough
Despite the month-long divestment that shrank the company’s market value by almost two-thirds, CrowdStrike’s share is still not cheap enough, making it vulnerable to further price declines.
With more than 23 times this year’s revenue, CrowdStrike compares favorably with other well-known high-growth cybersecurity software companies such as MongoDB (NASDAQ :), Fortinet (NASDAQ 🙂 and Okta (NASDAQ :)), which has a price-to-sale multiple (P / E). ) at 19.1 13.1 and 9.7, respectively, still too expensive.
By comparison, CrowdStrike’s peer companies, according to InvestingPro data, have a collective price-to-earnings ratio of 13.5, while the sector median is only 2.1.
Conclusion on CrowdStrike
While CrowdStrike is widely considered to be one of the best cybersecurity companies in the class, the stock may not be a big hit with investors anytime soon the financial turmoil continues due to the Fed.
According to various valuation models, including KUV or terminal values, the average fair value of CRWD shares as determined by InvestingPro is $ 144.48, which equates to a potential discount of 8% relative to the current price.
Investors should therefore refrain from buying the ailing software company until further notice.
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