Sign InCrowdStrike Holdings, Inc. (CRWD) Stock Plummets 11.10% - Technical Analysis & Short-Term Predictions
Summary
As of July 19, 2024, CrowdStrike Holdings, Inc. (CRWD) experienced a dramatic 11.10% plunge to $304.96 due to a critical IT outage stemming from its own update, pushing its Relative Strength Index (RSI) to an oversold 18, and suggesting a possible short-term rebound amid high volatility and a significant long-term value proposition.
Technical Analysis
CrowdStrike Holdings, Inc. (CRWD) experienced a significant drop in its stock price, closing at $304.96 on July 19, 2024, a decline of $38.09 or 11.10%. The stock's price ranged between $290.10 and $316.75 throughout the day. The Relative Strength Index (RSI14) stands at a notably oversold territory of 18, indicating a potential rebound in the near term. It's currently well below the 50-day moving average of $358.31 and marginally above the 200-day moving average of $288.58, suggesting potential support levels. The Average True Range (ATR) of 5.40 demonstrates a significant volatility.
The dramatic price drop was driven by an update from CrowdStrike that caused a global IT outage for Microsoft Windows hosts, amplifying market fears and expanding trading volume to 41.82 million shares, against an average of 4.69 million. The MACD (3-month) of 2.53 shows a slight upward momentum, indicating some underlying strength despite recent events. Immediate technical support is seen at $303.54, with major resistance at $342.18.
Fundamental Analysis
Fundamentally, CrowdStrike appears to be a high-growth company with a stratospheric P/E ratio of 554.47, reflecting significant investor optimism about future earnings growth. The Earnings per Share (EPS) is 0.55, and the market cap stands at $74.26 billion, making it a dominant player in the cybersecurity market. The upcoming earnings announcement on September 4, 2024, will be closely watched.
Discounted cash flow (DCF) valuation estimates the intrinsic value of CRWD at $367.31, suggesting that the stock is currently undervalued by approximately 20.47% based on the last close price. Analyst targets range between $150 and $437, with a median target of $370 and a consensus at $319.46.
News Impact
Recent news has exerted acute downward pressure on the stock. CrowdStrike's defective update caused a significant outage, directly impacting its reputation and stock price. News outlets have highlighted the outage's impact, with reports noting the irony of a cybersecurity leader causing such a catastrophic technology problem. Despite this setback, it’s important to note that the incident was not a security breach or cyberattack, a detail emphasized by the CEO.
Short-Term Performance Predictions
For the next trading day (July 22, 2024), it’s probable that the stock may experience some buying interest due to the oversold RSI and the inherent stability at immediate support levels. Given the sharp increase in volume and negative sentiment, expect volatility to remain high. Depending on market sentiment recovery, more aggressive short-covering rallies could push the stock toward the upper resistance levels, although it might still encounter substantial selling pressure.
For the upcoming week, the prevailing investor sentiment driven by news cycles and any possible management clarifications or rectifying actions will play a critical role. Still, immediate upward momentum is constrained by the loss of market confidence.
Long-Term Investment Potential
CrowdStrike's long-term prospects remain strong given its robust market position and the growing importance of cybersecurity. The company's fundamental strength, reflected in its high valuation multiples and market cap, underpins a bullish long-term outlook. However, such incidents could spark short-term volatility and demand closer scrutiny of operational risks. From a DCF perspective, the stock presents a sensible value proposition at current levels, especially if the company swiftly regains client trust and operational integrity.
Overall Evaluation
CrowdStrike Holdings, Inc. can be categorized as a 'Hold' candidate. The significant drop due to the recent outage incident and the historically high valuation multiples suggest caution in the short term. However, the company's dominant market position, strong long-term growth potential, and intrinsic undervaluation hint at a positive outlook for patient investors. The upcoming quarterly report will be crucial in determining if operational performance remains robust and if corrective measures have been effectively implemented.
