Is CrowdStrike stock worth buying in the face of the crisis? Opinions from 3 analysts.

CrowdStrike Holdings (NASDAQ: CRWD) made a major, unforced error on July 19 when a software update caused an outage for over 8.5 million users Microsoft Windows. Cybersecurity stocks have lost more than 20% of their value in two trading sessions as a botched update has crippled many of the world’s largest companies.

The key question for investors is how this will affect the stock over the long term. In this article, three Motley Fool contributors share their views on the state of CrowdStrike and where investors should go next.

Make no mistake: CrowdStrike is in survival mode

Jake Lerch: Let’s go make one thing clear: Mistakes happen. And boy, how CrowdStrike learned that lesson.

Some have called the series of computer outages the “world’s worst IT outage” after banks, hospitals and airports went down due to a faulty CrowdStrike software update.

The real questions for investors are: How much reputational damage has the company suffered and whether its stock outlook should be reassessed.

Let’s start with the reputational damage. It’s extensive and potentially long-lasting.

First, not all problems caused by the outage were fixed as quickly as possible. at the time of this writing — CrowdStrike says 97% of affected users were back online as of July 26. The outage caused flight delays and cancellations, postponement of critical medical procedures, delay of cancer treatment and suspension of 911 services in some areas.

In short, CrowdStrike’s software update brought with it a nightmare scenario that many experts predicted would come as a result of a catastrophic hack. That’s a serious problem because the company’s business model is built on the ability detect and prevent such disasters, don’t create them.

Once all current issues have been resolved, management To have new challenges. There will be no doubt about it several investigations and lawsuits which grow. Several members of Congress have already subpoenaed CEO George Kurtz to testify. None of this will help CrowdStrike focus on executing its business model or delivering profits to shareholders.

As a result, investors need to reassess the company’s ability to generate revenue growth, which is key to the bullish thesis. It will likely decline as customers abandon CrowdStrike altogether or reduce their subscription spending. The new lawsuits will force the company to use its earnings and cash flow to cover legal fees and settlements rather than deliver shareholder returns or grow its business.

In summary, investors should exercise extreme caution when it comes to CrowdStrike, at least for a few quarters. The company found itself in a huge mess — there is no reason for investors to get involved as well.

The story continues

Investors should take this issue more seriously than CrowdStrike apparently did.

Justin Pope: Mighty CrowdStrike has been a standout on the stock market and a favorite among growth investors since the company went public five years ago. However, the IT outage has created several headaches for investors, and it’s important to appreciate the potential impact on the stock.

Fortunately for CrowdStrike, the IT outage was caused not by a security flaw that could have further damaged the company’s reputation as a best-in-class cybersecurity provider, but by a faulty update.

The damage caused by the failure is staggering. Early insurance estimates put the direct financial losses to Fortune 500 companies alone at more than $5 billion. These are tangible losses and do not include anything incalculable, like reputational damage.

For example, thousands Delta customers were stuck in airline hubs for days with no way to get home. Do you think those people will want to book Delta flights again anytime soon?

Then, reports emerged that CrowdStrike allegedly offered customers a $10 gift card to compensate for any inconvenience caused by the outage. If true, it’s a laughably bad PR faux pas considering it’s arguably the most serious IT outage in history.

I’m not saying CrowdStrike is doomed, but it’s too early to tell how much this will hurt the company. The cybersecurity industry is fiercely competitive, and rest assured, other vendors will spend the next few months poaching the company’s customers. It could be a quarter or two before we see what the damage is.

Meanwhile, the company’s shares are still more expensive than those in its industry, despite a 30 percent decline:

I think the company can eventually get through this, but the stock is still way overpriced. We’re only a few days into the crash and no one yet knows the full extent of the damage.

Will CrowdStrike lose customers? How many? Will customers demand compensation or rebates? What about lawsuits? Better to be safe than sorry and stay out of the way until the dust settles.

How you manage CrowdStrike stock may matter more than whether you buy it

Is Healy: CrowdStrike investors now face a daunting challenge. The service disruption has disrupted healthcare, airlines, banking, and other industries, costing untold amounts. You have to assume lawsuits are coming, and it’s unclear how those costs will hit CrowdStrike. That’s why investors were right to dump its stock.

But as painful as it may be to think about buying now, history favors buying quality stocks when there is “blood in the streets,” to borrow a phrase from Baron Nathan Rothschild, a British nobleman from the 18th century. Indeed, the current crash probably qualifies as such an event.

CrowdStrike deserves credit for admitting its mistake and taking swift action to fix the issue, which is a first step toward addressing the significant reputational damage this could have caused.

Moreover, uncertainty is likely to eventually subside, which should bode well for the company, assuming attention gradually returns to the fundamentals. Fortune Business Insights estimates a compound annual growth rate (CAGR) of 14% for the cybersecurity industry through 2032.

What’s more, the company is forecasting revenue in the range of $3.98 billion to $4.01 billion for fiscal year 2025 (ending January 31, 2025). That represents 30% annual revenue growth through the midyear, and even if the outage forces a downward revision, revenue growth should outpace the estimated industry CAGR.

However, valuations don’t necessarily indicate that investors should buy now. The stock is currently trading at a price-to-sales (P/S) ratio of 19. While that’s down from a P/S of 29 just three weeks ago, the valuation is still higher than its most direct competitors. And given the current problems, most investors are probably reluctant to pay a premium for the stock.

Still, investors buying now should consider dollar-cost averaging. Adding CrowdStrike in small allocations over a longer period will minimize losses if the stock continues to fall. On the other hand, if there is somehow a quick recovery, shareholders will be holding on to at least some of the stock that will appreciate in value, increasing the likelihood of profiting from this uncertainty.

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Jake Lerch has positions in CrowdStrike. Justin Pope has positions in SentinelOne. Will Healy has positions in CrowdStrike and Zscaler. The Motley Fool has positions in and recommends CrowdStrike, Fortinet, Microsoft, Okta, Palo Alto Networks, and Zscaler. The Motley Fool recommends Delta Air Lines and recommends the following options: long January 2026 at $395 call options on Microsoft and short January 2026 at $405 call options on Microsoft. The Motley Fool has a disclosure policy.

Should You Buy CrowdStrike Amid Crisis? 3 Analysts Weigh In. was originally published by The Motley Fool