CrowdStrike Cut Its Guidance. Here’s What Its Charts Look LikeCrowdStrike Holdings NASDAQ:CRWD beat estimates on its latest quarterly numbers this week and cut guidance less than feared following July’s global computer outage, which stemmed from a problem with the cybersecurity firm’s latest software update. Let’s see what CrowdStrike’s fundamentals and technicals say about where the stock might go from here.
CrowdStrike’s Price Moves and Fundamental Analysis
CRWD initially lost some 36% in the days following the July 19 outage, but has since rebounded some 25% in less than a month.
The company reported after the bell Wednesday that it saw $1.04 in adjusted earnings per share on $963.87 million of revenue for the three months ended July 31.
That beat the $0.97 adjusted EPS and $958.5 million revenue that analysts’ consensus called for. Earnings also grew 41% year over year, while revenues gained 31.7% y/y.
But CrowdStrike’s release wasn’t really about those numbers. Many investors wanted to hear what management would say about the massive computer outage, sparked by a faulty CrowdStrike update for Microsoft Windows.
The problem –- considered perhaps the worst outage in IT history -- took down computer systems worldwide, affecting retailers, airlines, hospitals and more and causing at least an estimated $5 billion in damages, according to published reports.
Hard-hit Delta NYSE:DAL needed nearly a week to fix its systems, and has said it will sue CRWD over what it claims are at least $500 million in expenses and lost revenues, according to media reports. (CrowdStrike countered that Delta suffered more than other airlines did due to DAL’s alleged IT shortcomings.)
CRWD has since updated its tools and testing procedures, but the company is already facing lawsuits, presumably damaged its reputation and will likely lose some business given the outage’s size.
CEO George Kurtz said during Wednesday’s earnings call that “in working with customers post-incident, we quickly mobilized around customer loyalty.”
The firm appeared to be conservative on guidance for both the current quarter and full year, but it quickly became apparent that investors had braced for worse and CRWD actually rose 2.8% Thursday following the earnings report’s release.
CrowdStrike’s Technical Analysis
What about CrowdStrike’s technicals?
Let's take a look at the stock’s chart as of Thursday morning:
Readers will see that the stock has generally been in an ascending price channel since January 2023, with CRWD’s stock price more than tripling over that time frame.
However, July’s global computer outage threw a monkey wrench into that pattern and trashed the stock, which fell 36.5% from its $343.05 close on July 18 to its $217.89 Aug. 2 close just 15 days later.
But since then, CRWD has seen something of a moderate "V" shaped recovery, bouncing back some 25% between Aug. 2’s close and where the stock closed on Thursday.
Let's place a Fibonacci model on the entire move and see what we come up with:
Now, let's zoom in and look at the same model over just the past six months:
Readers will see that CRWD was "rescued" at the 61.8% Fibonacci retracement level of its entire rally from early 2023 into July 2024. The stock is also clinging to its 21-Day Exponential Moving Average (the green above), while a small “cup” pattern has now developed a handle with a $279 pivot.
One of two things seem likely to happen from here:
1) CrowdStrike rallies to take back its 200-day Simple Moving Average (the red line above) and its 50-Day Simple Moving Average (the blue line). That could prompt portfolio managers to increase their long-side exposure and send the stock higher.
2) CRWD sells off and creates a new post-cycle low. That could mean portfolio managers will decrease their long-side exposure, sending the stock lower.
In either case, neither the stock's Relative Strength Index (the gray line above) nor its daily Moving Average Convergence/Divergence (MACD, the black and gold lines above) look like they’ll provide much help to CrowdStrike right now. The MACD is currently somewhat bearish, although it appears to be improving.
(Full disclosure: At the time of writing this article, Moomoo Markets Commentator Stephen Guilfoyle was long CRWD and MSFT).
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