NEW YORK: CrowdStrike, a leading cybersecurity firm, saw its shares tumble by 13% on Monday as Wall Street analysts downgraded the stock, citing concerns over the financial repercussions following a global cyber outage last week.
The downturn in CrowdStrike’s stock follows a widespread disruption caused by a faulty update to its security software, which crashed computers running Microsoft’s Windows operating system. The incident had far-reaching effects, impacting internet services across various sectors including airlines, banking, and healthcare.
According to Microsoft, approximately 8.5 million Windows devices, accounting for less than 1% of all Windows machines, were affected by the glitch.
Despite expectations that CrowdStrike will recover due to its strong market position, analysts expressed worries about potential reputational damage, delays in new customer contracts, increased competition, and potential legal challenges.
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Guggenheim analysts noted, “We don’t believe it will materially affect renewals, at least not in the short term… However, we do think this will at least delay deal signings, if not cause some losses in closely contested deals.”
Meanwhile, CrowdStrike’s competitor SentinelOne saw its shares surge by 11% on Monday. J.P. Morgan highlighted SentinelOne as “the most obvious beneficiary” of what analysts described as the most extensive IT outage in modern history.
Bernstein analyst Peter Weed cautioned about potential legal repercussions, suggesting that affected customers might pursue legal actions once their systems are restored.
Following the disruption, services gradually resumed across industries later on Friday, although firms continued to grapple with backlogs, delays, and in some cases, canceled flights. This incident has raised concerns about the concentration of critical software in the hands of a few companies and the need for robust preventive measures.
CrowdStrike’s shares closed at $265.24 on Monday, following an 11% decline on Friday. Several brokerage firms reduced their price targets on the stock, with two downgrading their rating from “buy” to “neutral.”
“The globally disruptive nature of this event will likely have an impact on CrowdStrike’s financial and operational performance… Time spent on damage control is time spent on not selling,” commented J.P. Morgan analysts.
