CrowdStrike's Growth Remains Strong—Buy While It's Down

Key Points

• CrowdStrike issued mixed guidance for 2025 but left analysts unfazed, expecting a double-digit upside from critical support levels.
• Record free cash flow allowed for balance sheet improvements and a double-digit gain in shareholder equity.
• The company is expected to grow double annually in the next ten years and widen its margin.

CrowdStrike’s NASDAQ: CRWD uptrend will continue because the cybersecurity company has traction, momentum in its deal cycle, and a forecast for another record-setting year in 2025. The Q1 2025 stock price decline is an opportunity that shouldn’t be passed up. It was caused by unexpectedly weak earnings guidance, but there is a silver lining.

The expectation of higher tax rates impacts the guidance, resulting from its growing business and improving profitability. While a headwind, it is offset by robust cash flow and rapidly improving shareholder value, trends expected to continue this year. 

The analysts’ response to the 2024 earnings news says it all. MarketBeat tracks a relatively high number of analysts covering this stock, 44, and despite mixed activity following the release, the trends are only bullish. Analysts' trends include increasing coverage, firming sentiment, a high conviction in the Moderate Buy rating, a bullish bias with 72% of the ratings pegged at Buy or higher, and a rising price target.

The consensus price target reported by MarketBeat implies a 12% upside from critical support levels, rising by 20% the day following the release. The revisions include some price target reductions, but all fresh targets are above the consensus, leading to the high-end range and another 15% upside when reached. 

Takeaways from the analyst chatter include concerns about slowing penetration growth and margin guidance, but positives overshadow them. Positives include improving deal momentum after last year's outage, the 25% increase in ARR, and expected business acceleration. Dan Ives of Wedbush says the company is moving in the right direction and has reaffirmed the long-term outlook.

The long-term outlook includes a low 20% revenue CAGR through 2035, with bottom-line results compounded by a widening margin. Earnings are expected to grow at a more robust 30% CAGR, which puts this stock at only 11x its 2035 EPS target. 

CrowdStrike Insiders Sell Stock in Q1: Institutions Are Buying

The insider activity is a red flag for CrowdStrike investors but doesn’t negate the long-term outlook for share prices. Although they are selling in Q1 2025 and have sold on balance for numerous consecutive quarters, the sales are small, periodic, and from multiple insiders aligning with other companies that utilize share-based compensation. The more telling data is that insiders have considerable skin in the game, holding more than 4.25% of the stock, and the institutions are buying. 

Institutional activity is noteworthy because the group sold on balance in Q2 of 2024, reverted to buying in Q3 and ramped activity into Q1 of 2025. In only two months, the Q1 2025 activity set a two-year high and may surpass the prior peak before the quarter ends. They own more than 70% of the stock and strongly support this market. 

Analysts and institutions are on board because of CrowdStrike’s rapidly improving financial condition. At the end of 2024, the highlights included increased cash, current, and total assets, with total assets growing at nearly double the pace of liability. Total liability leverage fell to 1.6x equity from 1.85x, increasing equity by more than 40%. Similar gains are expected for F2025 because of the outlook for record earnings. 

The Technical Outlook: CrowdStrike Pulls Back to Test for Support

CrowdStrike’s stock price action in early 2025 is ugly, with the stock pulling back by 25%. However, the pullback is expected due to the rapid rise in share price from summer 2024 until Q1 2025 and move to new highs. The pullback is testing for support and shows it at a critical level, aligning with the 150-day EMA and previous price action.

Support is near the $355 level, coincident with a price gap that opened in June 2024 and a consolidation leading to new all-time highs at the year’s end. Assuming the market continues to support this stock at present levels, the rebound should begin soon and could take this market to a new high by the end of 2025.