CrowdStrike Sees Canaccord Cut Price Target To $175 From $230

On November 29th, CrowdStrike (NASDAQ: CRWD) reported its third-quarter financial results. The company announced revenues of $581 million, growing 53% yearly. Gross profits came in at $422.65 million, or a 72.8% margin. Operating profits before non-recurring expenses was -$56.42 million, slightly higher than the -$39.29 million loss a year ago.

The company said it ended the quarter with annual recurring revenue of $2.34 billion, growing 54%, with $198.1 million being net new recurring revenue added this quarter. The company’s net loss grew wider this quarter, going to -$55.0 million, worse than the -$50.5 million a year ago.

Crowdstrike generated $242.9 million in cash from operations this quarter, growing 52.7% year over year. At the same time, free cash flow came in at $172.49 million, an increase of 40.4% yearly. The company ended the quarter with $2.47 billion of cash and cash equivalents.

The company reported that it added 1,460 new subscription customers in the quarter, bringing the total customer base to 21,146 as of October 31, 2022 and that the customers that have adopted five or more, six or more, and seven or more modules were 60%, 36%, and 21%, respectively.

CrowdStrike currently has 40 analysts covering the stock with an average 12-month price target of US$183.94, or an upside of 48%. Out of the 40 analysts, 12 have strong buy ratings, 25 have buys and the last three have hold ratings on the stock. The street-high price target sits at US$385, representing an upside of about 210%.

In Canaccord Genuity Capital Markets’ note on the results, they reiterate their buy rating but lower their 12-month price target down to US$175 from US$230 due to the investment bank lowering their estimates and multiple compression in the software security sector.

On the results, Canaccord specifically focused on the company’s annual recurring revenue (ARR), which came $20 million below their estimate for the quarter. While net new ARR was “below expectations and declined from the record $218M last quarter.” Management believes this was due to the macroeconomic conditions, which have caused average days to close deals to lengthen by 11%.

Canaccord has lowered their 2023/2024 total ARR estimates after management talked down and reduced their estimates on the call after the results. Canaccord now expects 2023 ARR to be $2.52 billion and 2024 to be $3.31 billion. This is slightly down from the $2.61 billion and $3.62 billion they had for 2023 and 2024.

Outside of the worse-than-expected ARR, Canaccord said that most financial metrics exceeded their expectations. Non-GAAP operating margin of 15% beat their estimate of 13%, putting non-GAAP EPS at $0.40, which was better than their expected $0.31. With this, Canaccord says that CrowdStrike is one of the highest-quality SaaS names and expects the stock to outperform its peers over the next several years.

Information for this briefing was found via Edgar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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