Rosenblatt lowers estimates on CrowdStrike, says long-term thesis intact

Investing.com - The recent global IT outage caused by a faulty software update at CrowdStrike Holdings Inc (NASDAQ:CRWD) has prompted analysts at Rosenblatt to revise their projections for FY25 and FY26.

Despite the company's swift response and deployment of a fix, the incident's unprecedented scale and disruption across critical industries will undoubtedly have short-term repercussions. This scenario is evidenced by a shift in resource allocation towards customer support and remediation, potentially leading to delays in new customer acquisitions and elongated sales cycles.

Furthermore, CrowdStrike's recent 8-K filing acknowledging an ongoing financial impact evaluation introduces uncertainty into economic models.

Rosenblatt views this as a temporary setback in an otherwise strong growth trajectory, supported by the company's solid fundamentals and leading market position. Analysts remain confident in the company's ability to learn from this experience, enhance its quality assurance processes, and emerge as an even more reliable partner for its customers.

These factors underpin continued confidence in the stock, with Rosenblatt reiterating a Buy rating for Crowdstrike with a price target of $350.

CrowdStrike has actively addressed customer concerns following the IT incident, with Chief Security Officer Shawn Henry directly communicating with customers to rebuild trust. This proactive approach is vital for maintaining customer relationships during this challenging period.

While the full financial impact is still uncertain, Rosenblatt has adjusted revenue projections for FY25 and FY26 to account for potential delays in new sales and heightened scrutiny of the platform.

Existing customers may also demand concessions during renewals. CrowdStrike's commitment to customer satisfaction may necessitate compromises on pricing to meet these demands.

Operational expenses are also expected to rise due to remediation efforts, including seeking assistance from Deloitte to address issues with affected companies like Delta Air Lines Inc (NYSE:DAL), United Airlines Holdings Inc (NASDAQ:UAL), Marriott International Inc (NASDAQ:MAR), and others.

The CrowdStrike IT incident could also trigger legal action, including class-action lawsuits and individual claims. While CrowdStrike's SLA agreements limit liability, legal costs associated with potential lawsuits and settlements are a concern. The company's insurance coverage and experienced legal team should help mitigate these expenses.