CrowdStrike Stock Plunges 6% in a Month: Time to Cut Losses?

Core Insights - CrowdStrike Holdings, Inc. (CRWD) has experienced a significant decline, dropping 6% in the past month and 19% from its 52-week high of $455.59 reached on February 19, despite a year-to-date gain of 31.6$32 million deal with Carahsoft Technology, which was intended to provide cybersecurity tools to the IRS, but the IRS reportedly never purchased the products, raising suspicions of financial irregularities [4][6]. - The investigation is focused on whether CrowdStrike engaged in "pre-booking" or channel stuffing, which involves prematurely recognizing revenues from incomplete or dubious transactions to inflate financial results [5][6]. Market Conditions - Broader market weaknesses, including fears of a global economic slowdown and high interest rates, are contributing to the stock's decline, making high-valuation stocks like CrowdStrike more vulnerable [8][9]. - The escalating tariff war has also spooked investors, leading to a tech-sector sell-off that has particularly affected high-growth companies [8]. Financial Performance and Guidance - CrowdStrike reported better-than-expected fourth-quarter fiscal 2025 results but provided disappointing profit guidance for fiscal 2026, projecting adjusted EPS of $3.33-$3.45, which is below the Zacks Consensus Estimate of $4.36 [10][11]. - The company anticipates fiscal first-quarter adjusted EPS of 64-66 cents, significantly lower than the consensus estimate of 94 cents, and its revenue outlook of$1.1006-$1.1064 billion barely meets consensus estimates [10][11]. Valuation Concerns - Despite the recent decline, CrowdStrike continues to trade at a high forward 12-month price-to-sales (P/S) ratio of 18.63, which is significantly above the industry average of 13.22, making it vulnerable to further corrections [12][14]. - The company's premium valuation compared to peers like Palo Alto Networks, Fortinet, and CyberArk Software leaves little room for error, increasing the risk of downside if growth expectations are not met or if negative developments arise from the ongoing investigations [14]. Conclusion - Given the mounting legal risks, disappointing earnings guidance, and broader market pressures, it is suggested that investors consider selling CrowdStrike stock for the time being [15][16][17].