The massive software upgrade SNAFU from CrowdStrike Holdings, Inc. (NASDAQ: CRWD) was self-inflicted and quite painful for its customers and shareholders alike. Many investors worried at the time that botching a software update as badly as what was seen after customers’ systems crashed, some for several days, and causing severe disruption (and loss of revenues) to their businesses would have led to a mass exodus and permanent loss of business. It’s just not that simple in dealing with large technology integrations.

After suffering losses of more than 40% from pre-crash to the trough and vaporizing $40 billion of a $90 billion or so market capitalization, CrowdStrike shares have fully recovered back to even. And analysts on Wall Street are one-upping each other with higher and higher price targets right before its earnings report.

CrowdStrike’s earnings are due November 26 its analysts are unrelenting about raising their price targets ahead of the report.

THEN, THERE AND BACK AGAIN

It was July 19, 2024 that the upgrade crashed millions of Windows systems with the notorious “blue screen of death” for users who had shut down their PCs. With the shares having fallen rapidly from $380 a few days before the software upgrade SNAFU and having bottomed around $220 for a very brief period of time in August, now the cybersecurity player’s shares have risen over 65% to $372.26. That’s also nearly 10% above the July 18 closing price of $343.05.

Tactical Bulls does not issue detailed earnings previews and simple recaps of each earnings report. There are too many of those reports readily available to bother. What we do look for is the reactions and the pre-news moves in the shares to see if there is opportunity.

The long and short ahead of the earnings report is that a lot of money has been placed in a “tactical bull” position betting that earnings will be well received by Wall Street whatever is reported. Again, that’s outside bets and outside opinions rather than a recommendation here.

The company is expected to be close to having $1 billion ARR (annual recurring revenues) per quarter very soon. Total revenue predictions (consensus) of $3.9 billion for this year’s sales (up 27%) is projected to be almost $4.8 billion in annual sales (up 22%) the following year. Now keep in mind that Wall Street investors are addicted to “subscription revenues” that the ARR represents — and that’s only about 40% of top cybersecurity leader Palo Alto Networks, Inc. (NASDAQ: PANW).

CrowdStrike also recently announced the acquisition of Adaptive Shield to help it deliver unified cloud and identity security as it builds out its platform.

Tactical Bulls is showing the key analyst changes and summaries that have been made shortly before the earnings report and after the election. Also included are reviews of options trading trends, the stock chart, short interest data, and a typical disclaimer.

WHAT WALL STREET IS THINKING

Many analysts are chiming in with significant price target hikes right before the coming earnings report. Tactical Bulls has shown the recent ratings by firm and price targets by data. A look at the September 3, 2024 “CrowdStrike Worthy of Another Look” report will show just how much the price targets have changed even since then.

• Baird (Outperform) to $375 From $315 (11/22)
• Barclays (Overweight) to $372 from $295 (11/18)
• Cantor Fitzgerald (Overweight) to $370 from $350 (11/21)
• Jefferies (Buy) to $415 from $345 (11/22)
• JPMorgan (Overweight) to $369 from $330 (11/22)
• KeyBanc (Overweight) to $395 from $345 (11/22)
• Morgan Stanley (Overweight) to $355 from $325 (11/18)
• Stifel (Buy) to $375 from $300 (11/20)
• Truist (Buy) to $375 from $325 (11/18)

According to the Morgan Stanley target update:

We think CrowdStrike is recovering well post the July 19th outage based on our checks. While the stock has nearly returned to pre-outage levels sooner than expected, we think investor sentiment remains largely negative and see further upside post a better-than-expected FQ3 result.

There were some analysts reiterating their rating and price targets too…

• CrowdStrike was initiated with a Market Perform rating and a $295 price target by a firm called CICC on November 18.
• CFRA reiterated its Buy rating and $393 price target on November 16.
• JMP Securities reiterated its Outperform rating and $400 price target on November 4.

If you notice a theme (or themes) above it may be that there have been no fresh “Sell” and equivalent ratings or even any downgrades based on valuation issued yet in these analyst updates. And many of the fresh price targets that have been updated above are now close to or even under the most recent $372.26 closing price. So, does this mean even more price target hikes and updates have to be made after the earnings report as well? That’s generally what happens in Wall Street research reports after big news.

OPTIONS SHOW STRANGE EXPECTATIONS AS WELL…

It is not unusual to see call options more actively traded versus put options. After all, most investors only know to invest for a stock to rise. That said, the 5 closest strike prices traded nearly 3,300 call option contracts versus 1,000 put option contracts on Friday alone. And the open interest, the contracts which have already traded and are still “open” positions, was more than 1,050 call options versus only 75 put option contracts.

This open interest and options volume seems smaller compared to other stocks but there is one simple reason for this. Just one contact in the closest 5 strikes costs over $1,200 to $2,000 based on ask prices of $12.90 to $20.45. That means to speculate or hedge a 100-share position, or just to speculate on the stock will cost that much. It’s simply too much money for many non-institutional investors.

WHAT SHORT SELLERS ARE THINKING

This is the short interest shown most recently (no November data available yet) going back to earlier this summer before the software upgrade SNAFU hit the stock. The following data comes directly from the NASDAQ short interest reports. This is by date and by the total short interest. Additional data can be found on the NASDAQ site and this should be updated to show the mid-November short interest shortly before the earnings report. The line-graph below is an in-house representation with A.I. assistance.

10/31/2024   8,040,430
10/15/2024   8,944,988
09/30/2024   10,090,709
09/13/2024   8,616,527
08/30/2024   8,354,186
08/15/2024   8,473,443
07/31/2024   8,290,148
07/15/2024   8,336,584
06/28/2024   12,614,368
06/14/2024   8,186,560
05/31/2024   6,745,309
05/15/2024   6,686,504

DISCLAIMER

Tactical Bulls does not have any formal investment rating or price target for shares of CrowdStrike and its competitors. All price targets and investment ratings herein are from the firms specified. Those price targets and ratings are not necessarily the same expectations of Tactical Bulls.

Any decision to buy or sell stocks (or hold, avoid or even short-sell) is solely the responsibility of each investor. Those decisions should be made with help from a financial advisor.

THE CHART SAYS…

The following chart has been provided by StockCharts.com for your view. The chart shows that CRWD shares leaped handily back above the 50-day and 200-day moving averages earlier in November. Only 4 of the 15 trading days seen so far in November have been negative days for CRWD and none of the daily moves down have been a loss of more than 1% on that day.

CRWD chart is courtesy of StockCharts.com