The cybersecurity specialist is coming back from a dramatic dip in July. Are investors ready to forgive the company for a costly service outage?
Shares of cybersecurity expert CrowdStrike (CRWD -2.73%) rose 19.6% in August 2024, according to data from S&P Global Market Intelligence. The company did report earnings last month, but there was no triumphant stock jump that day. Instead, CrowdStrike’s August gains represented a gradual recovery from July’s painful crash.
The effects of CrowdStrike’s July outage
You probably don’t need a reminder, but here’s a quick rundown of July’s plunge anyway: The company’s security services suffered a widespread outage on July 19, caused by a problematic software update.
Clients saw millions of computers running CrowdStrike Falcon on Microsoft Windows crash and stay down until a fix was applied. Airlines canceled flights. Financial services ground to a halt. Healthcare systems failed. Analysts called it the most expensive technology outage in history.
As a result, CrowdStrike’s stock fell more than 40% in July. August’s 19.6% recovery didn’t come close to repairing that damage, as investors took a 27.6% haircut across the full two-month period.
Still, it was a significant rebound. CrowdStrike was quick to provide remedies and instructions to restart the crashed Windows computers. CrowdStrike has taken steps to ensure this issue does not happen again, including an immediate fix paired with improved error-checking of future software updates.
CrowdStrike also proved that the outage didn’t result in security leaks or exploitable security holes. On the second-quarter earnings call, CEO George Kurtz highlighted a large customer that committed to a much larger long-term contract shortly after the Windows outage.
Management lowered the midpoint of their full-year earnings guidance range from $3.98 to $3.63 per share, citing tougher contract renewal talks and the direct financial impact of loyalty-boosting rebates.
But that report arrived in the last week of August, and most of the monthly rebound was already in the books by then. Investors seem prepared to move on from the July outage as a one-time event that left CrowdStrike’s business prospects mostly intact.
Is CrowdStrike a good buy after the July dip and August rebound?
Despite the steep price dip it took in July, CrowdStrike’s stock isn’t cheap today. Shares are changing hands at the lofty valuation ratios of 18 times sales and 57 times free cash flow. Then again, the company is posting tremendous sales growth and solid cash profits.
Growth-oriented investors may see a buying opportunity in CrowdStrike’s price dip, but it remains to be seen exactly how deep the financial wounds from that outage will be in the long run. Personally, I’m staying on CrowdStrike’s sidelines for now.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.