CrowdStrike stock price has bounced back and almost doubled in the past few months as the impact of its outage fade. CRWD shares jumped to $360 on Friday, its highest level since July 24. It has soared by 77% from its August low and is slowly matching towards its all-time high.
CrowdStrike stock price analysis
The weekly chart shows that the CRWD share price bottomed at $200 a few months ago as its outage triggered a major crisis globally, with Delta Air Lines losing over $500 million. The sell-off intensified after the Japanese yen carry trade unwinding in August.
Recently, however, the stock has bounced back and joined other American companies that have soared to their all-time highs.
On the weekly chart, the CrowdStrike stock price has rallied and crossed the important resistance level at $298, its highest swing in 2021 and the previous all-time high. This was a notable level since it was the upper side of the cup and handle pattern, a popular continuation sign.
Its August low was the lower side of the handle section. The stock has now remained above the 50-week and 25-week Exponential Moving Averages (EMA), a sign that investors are bullish on it.
Also, the Relative Strength Index (RSI) and the MACD indicators have all pointed upwards, which is a sign of renewed momentum. The RSI is yet to get to the overbought level, while the Average Directional Index (ADX) is pointing downwards.
Therefore, the CrowdStrike share price has the momentum to potentially rise to its all-time high of near $400. However, there is also a risk of a reversal since it has formed what looks like a rising wedge, a popular reversal sign. If this reversal works out, the stock may drop and retest the key support at $200.
Read more: Should you buy CrowdStrike stock under $275? Analysts predict major upside
CRWD earnings ahead
The next important catalyst for the CrowdStrike share price will be its earnings scheduled on Tuesday, November 26.
These numbers will provide more color on the company’s growth as signs show that the cybersecurity industry is cooling. It is also now competing with Wiz, one of the fastest-growing companies in the world.
The most recent results showed that the company’s revenue jumped by 32% in the second quarter to $963 million. This growth happened as the number of companies using its products remained at an elevated level despite the outage. Its subscription revenue rose to $918 million, while the annual recurring revenue (ARR) rose by 32% to $3.86 billion.
Analysts expect that CrowdStrike’s revenue will show that its business continued to do well in the third quarter. Revenue is expected to come in at $983 million, a 25% increase from the $786 million it made in the same period last year.
For the year, analysts expect that its annual revenues will be $3.9 billion followed by $4.7 billion in the coming financial year. If these numbers are correct, they will signal that the company is still experiencing double-digit growth rates.
The main concern for CrowdStrike and other companies in the cybersecurity industry is its hefty valuation, which stands at over $87 billion. These are huge numbers for a company whose revenue will likely hit $10 billion by 2030 if the current growth trajectory continues.
That would signal a forward price-to-sales ratio of 8.7, which is higher than most companies. The concerns get more when you consider its earnings. In this case, it has a forward P/E ratio of 96, higher than the sector median of 24. In contrast, Nvidia, a more profitable company that has faster growth metrics, has a multiple of 49.
For a SaaS company, the best approach to value it is to look at its rule of 40, which looks at its growth and margins. It has a forward revenue growth of 28 and a net income margin of 4.8, giving it a value of almost 33, meaning that it is a highly overvalued company.
The fact that CrowdStrike is overvalued is not a sign that you should sell it. Instead, the stock may continue doing well as long as it demonstrates strong revenue and profitable growth.
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