The stock of cybersecurity firm CrowdStrike (CRWD) has been downgraded by Wall Street investment bank Morgan Stanley (MS) over valuation concerns.
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Keith Weiss, a top five-star rated analyst with a 65% success rate and average return of 13.20%, has lowered his rating on CRWD stock to a Hold-equivalent equal weight from a Buy-equivalent overweight previously. Despite the rating downgrade, Weiss raised his price target on the stock slightly to $495 from $490. The new price target is 4% higher than where the shares currently trade.
In a note to clients, Weiss wrote that Morgan Stanley is “stepping to the sidelines given full valuation,” adding that investors should “take a pause as valuation looks full.” The analyst also stressed that “the second-half acceleration we expect now looks well priced in the shares.”
Continued Spending
Although Weiss downgraded CRWD stock after its 40% year-to-date rally, he still sees growth ahead for the cybersecurity firm. Specifically, he cited how security software has become one of the “most defensive” areas of technology spending at corporations across America. As such, he sees sustainable 25% free cash flow and annual growth for CrowdStrike continuing over the next three years.
But Weiss noted the stock now trades at 21 times enterprise value to 2026 estimated sales versus the large-cap software average of 12 times. That valuation is extremely rich and makes CRWD stock vulnerable to a pullback, he said. “We see balanced risk-reward at current levels,” wrote Weiss.
Is CRWD Stock a Buy?
The stock of CrowdStrike Holdings has a consensus Moderate Buy rating among 39 Wall Street analysts. That rating is based on 27 Buy, 11 Hold, and one Sell recommendations issued in the last 12 months. The average CRWD price target of $496.69 implies 4.17% upside from current levels.
