CrowdStrike(NASDAQ: CRWD) experienced the worst times this year. A faulty software update the cybersecurity giant launched in July caused the world’s worst-ever IT outage – and sent shares plunging more than 20% in two trading sessions. CrowdStrike took immediate action, released a fix for the issue within about an hour, and took steps in the weeks that followed to prevent a similar event from happening again.
As a result, customers and investors appear to have maintained their confidence in the company. The stock has risen 50% since its August low and is heading for a 30% gain this year. And in the earnings report that followed the outage, CrowdStrike said most customers remained on board and that the company had even signed some major new contracts.
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That’s great news, but it’s important to keep in mind that the impact of the outage may not be completely over yet. CrowdStrike is offering compensation to customers, and it’s forecast to hit earnings in the coming quarter. We’ll take a closer look at these and other details on November 26, when CrowdStrike reports third-quarter fiscal 2025 earnings. Should you purchase CrowdStrike before this important date? Let’s see what history says…
Image source: Getty Images.
So let’s talk about how CrowdStrike became such an industry giant in the first place. The simple fact that the July outage brought so many important operations to a standstill – from flights to operations – shows how deeply implanted this company’s cybersecurity system is across the globe. CrowdStrike offers customers a single lightweight agent known as Falcon – powered by artificial intelligence (AI) – that integrates data from the customer and beyond to predict threats.
Customers can choose from 28 modules to tailor the security system to their needs, and each of these modules connects seamlessly to Falcon. This makes Falcon a great option for customers of all sizes, giving them the flexibility to scale up or down services.
All of this has helped CrowdStrike’s revenues soar recently, beating analyst expectations for at least the past four quarters, including the quarter after the outage. In fact, in that quarter, hit by the outage, CrowdStrike showed its resilience. The outage occurred in the last two weeks of the reporting period, when most deals typically close, but this time those deals were pushed to the next quarter.
Still, CrowdStrike managed to report a 32% increase in total revenue to over $963 million, and annual recurring revenue (ARR) also rose 32% to $3.86 billion – again increasing in the quarter then added $200 million in ARR. Additionally, the company maintained most of the deals in the pipeline and added new ones. So even after a major challenge during the quarter, CrowdStrike continued to excel, giving us reason to be optimistic about the company’s future.
But should we specifically buy CrowdStrike before the next earnings report? A look at history shows that the company’s stock price has risen over the past month following earnings reports for the past five consecutive quarters. After the recent second quarter report, the stock rose more than 8% in the subsequent one-month period, and after the first quarter report, the stock rose 26%. In the three preceding quarters – the fourth, third and second of the 2024 budget year – it increased by 6%, 20% and 12% respectively in the following month.
So history tells us that CrowdStrike has been winning lately thanks to its earnings reports. And the company’s latest earnings report – after a major crisis – was no exception.
However, it is important to note that, as mentioned above, the impact of the crisis is not yet over. The compensation offered to customers – customer engagement packages – will impact third-quarter revenue by about $30 million, CrowdStrike predicted. The company forecast quarterly revenue between $979.2 million and $984.7 million, including the impact of the commitment package. Investors will be looking at performance here, and any miss could weigh on the stock.
Now let’s return to our question. Should You Buy CrowdStrike Before the November 26 Earnings Report? If you do that, and if CrowdStrike follows the historical trend, you can make short-term profits. But what’s even better is winning in the long run, and the good news is that you don’t have to time the market and buy a stock on a specific day to do that. If you hold CrowdStrike stock for a number of years, its performance in a few weeks won’t change your overall returns much at all.
I like CrowdStrike for its solid earnings numbers, its resilience after a big challenge, and its long-term prospects – and that makes it a great stock to pick up today or after November 26.
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds and recommends positions in CrowdStrike. The Motley Fool has a disclosure policy.
Should you purchase CrowdStrike before November 26? This is what history says. was originally published by The Motley Fool
