Is CrowdStrike worth buying after a security failure?

Crowd blow (NASDAQ:CRWD) the company’s stock has fallen significantly since cybersecurity software caused a global computer outage on July 19. Shares fell nearly 40% in response to the incident, but have since rallied and are now only about 15% below their pre-outage price.

So should you buy CrowdStrike when things seem to be looking up?

CrowdStrike continues to be in high demand, even after the mistake

Before the failure, CrowdStrike was the undisputed leader in the cybersecurity space. In addition to endpoint protection (which protects network access points like a laptop), it offers 28 modules that provide other security and capabilities of the Falcon platform. These products cover both cloud security and identity protection, creating a comprehensive cybersecurity product that once fully integrated is hard to break away from.

Indeed, as of Q2 FY25, 65% of CrowdStrike’s customer base was using at least five modules. This shows how CrowdStrike’s products have been integrated into its customer base, which is likely why the company didn’t see a massive customer churn immediately after the outage. Moreover, 48% of the company’s largest customers (those with at least $100,000 in annual recurring revenue, ARR) use eight or more modules.

The outage occurred in the final two weeks of CrowdStrike’s fiscal second quarter (ended July 31), so its full impact on the business remains unclear. In June, management projected total revenue of $3.99 billion (mid-range) for fiscal 2025. After the shutdown, management lowered its forecast to $3.90 billion (also mid-range), a decline of just 2.4 %.

This is a minor change in the grand scheme of things, and management has a history of exceeding expectations and elevating guidelines.

Looking ahead, the next results report should shed more light on the impact of this incident. If dissent continues to be muted, CrowdStrike will prove its resilience and strengthen its position as an industry leader.

Shares are still expensive

Because CrowdStrike has been a leading cybersecurity company for years, its valuation is premium. In fact, the stock was so expensive that even a 40% drop didn’t make it a bargain – its price-to-sales ratio never dipped below 15.

Data according to YCharts.

While the company’s stock is no longer trading at nearly 30 times sales, its current valuation is still expensive.

As far as investors can tell at this stage, CrowdStrike continues to grow rapidly, with its ARR up 32% last quarter. Investors need to look at fiscal third-quarter results to better understand the long-term implications the outage could have on CrowdStrike’s business. However, don’t be surprised if it continues to deliver strong results, as the demand for cybersecurity software has never been greater.

So, is CrowdStrike stock worth buying? This may be a good option for investors who do not have an existing position in cybersecurity companies. CrowdStrike is still a top pick in cybersecurity, and given the huge tailwinds blowing in the industry’s favor, it could still be a great long-term investment.

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Keithen Drury has positions at CrowdStrike. The Motley Fool holds positions on and recommends CrowdStrike. The Motley Fool has a disclosure policy.