Thanks to an ugly software update failure, cybersecurity specialist CrowdStrike (CRWD) suffered a humiliating implosion of equity value. It’s understandable. Companies like CrowdStrike are supposed to prevent network disasters, not cause them. That said, options traders seem to believe the sell-off has been overdone. With the smart money being so daringly optimistic, I’m going to follow the trend with a bullish assessment of CRWD stock.
What’s Behind the Mess in CRWD Stock?
The tragedy behind CrowdStrike is that CRWD stock was performing swimmingly well this year until the troubles happened. In the trailing month, shares stumbled almost 34%. On a year-to-date basis, the cybersecurity giant now finds itself down 3%. So, what exactly caused this mess?
As TipRanks reporter Radhika Saraogi explained, CrowdStrike’s faulty software update caused what’s known as the Blue Screen of Death (BSOD). “A BSOD is a stop error or black screen error, which occurs when a critical issue forces Windows to shut down abruptly to prevent further damage,” Saraogi stated.
Unfortunately, several enterprises and institutions across the world run on Microsoft (MSFT)-based systems. The outage – which appears to be tied to a technical issue with CrowdStrike’s endpoint protection solution called Falcon – impacted several sectors. Payment systems failed, flights had to be canceled, and a host of other problems materialized.
To its credit, CrowdStrike responded immediately. It figured out what the issue was and delivered a solution within hours. Still, that wasn’t enough for investors, who punished CRWD stock. In their eyes, the problem never should have happened in the first place. Still, there’s a case to be made about taking the opposite side of the trade.
Options Traders Buy the Pain in CrowdStrike
While not dismissing the ugliness in the charts, it’s also important to acknowledge that options traders – the smart money – appear to be taking the opposite approach to what you might term the public money. Indeed, options flow data, which focuses exclusively on large transactions likely placed by institutional or professional traders, delivers a far different interpretation than the common bearish one.
Last Friday, net trade sentiment for CRWD stock options stood at just over $2.7 million, favoring the bulls. This statistic is calculated by totaling the premiums of options with bullish and bearish sentiment. Breaking it down, total premiums for optimistically focused derivatives reached nearly $4.24 million. On the pessimistic side, the number landed at almost -$1.54 million.
What’s more, TipRanks’ screener for unusual options activity confirms that there is a bias toward the long side. Between the August 8 and August 9 sessions, options with bearish sentiment landed at 24 separate transactions. For bullish sentiment, the transaction count reached 26.
At first glance, this difference doesn’t sound like much. However, transactions with bullish sentiment saw volume reach 4,938 contracts. On the flip side, transactions with bearish sentiment only landed at 3,967. This data confirms what investors are seeing in options flow: the smart money is betting more heavily that CRWD stock will rise in value.
Fundamentally, this contrarian approach makes sense. As TipRanks contributor Ebube Jones explained, CrowdStrike commands a strong position in the cybersecurity market. “In its latest earnings release for Q1 2025, the company reported a net new annual recurring revenue (ARR) of $212 million, a 22% year-over-year increase. This strong performance highlights effective business strategies and a loyal customer base,” wrote Jones.
There’s another point that’s quite intriguing: “Cathie Wood has taken advantage of the recent pullback, loading up on CrowdStrike shares. This move by Wood and her team at ARK Invest shows that despite some short-term hiccups, there is still great confidence in CrowdStrike’s long-term prospects,” Jones remarked.
Valuation Highlights a Tempting Opportunity
Beyond smart traders and smart individual investors buying CRWD stock, there’s yet another reason to consider CrowdStrike: the valuation. Right now, shares trade hands at 17.9x trailing-year sales. While that’s quite high for an entity in the infrastructure software realm, demand for cybersecurity solutions will likely only increase.
That’s where CRWD stock becomes very intriguing. Sure, the company suffered an ugly incident. However, the core business itself is strong and increasingly relevant. Further, in the one-year period ending April 30, 2024, the market gave it an average sales multiple of 19.87x. Even better, in the half-year period ending on the same date, the average multiple stood at 24x.
In other words, once the ignominy has been digested, CRWD stock could easily rise back to its former valuation. That’s what makes shares so compelling right now.
Is CRWD Stock a Buy, According to Analysts?
Turning to Wall Street, CRWD stock has a Strong Buy consensus rating based on 30 Buys, six Holds, and one Sell rating. The average CRWD stock price target is $355.63, implying 43.34% upside potential.
The Takeaway: CRWD Stock Should Eventually Regain Its Mojo
Although CrowdStrike’s faulty software update was an ugly incident, it appears that the matter is overblown – at least, that’s what the smart money seems to think. Professional traders and institutional investors have been scooping up shares of CRWD stock during this weakness. Fundamentally and financially, this contrarian move makes sense. Cyber crimes are only rising in intensity, and the market previously accepted a high premium for CrowdStrike. Therefore, a return to normalcy may be in the cards.
