Rosenblatt analysts see the decline in CrowdStrike (NASDAQ:) shares as a strategic buying opportunity despite a global technology outage caused by a faulty software update.
CrowdStrike shares fell more than 14% in premarket trading after the outage, a reaction Rosenblatt considers excessive given the nature of the issue.
Analysts confirmed that the outage was due to an isolated software glitch, not a systemic flaw in the CrowdStrike platform.
CEO George Kurtz was quick to address the issue, insisting it was not a security breach, and promptly rolled out a fix. Rosenblatt sees the incident as a demonstration of the company’s transparency and responsiveness in dealing with disruptions.
The company notes that the disruption’s impact on critical services, including major airlines like Delta and United Airlines, financial institutions, media companies, and emergency services, highlighted CrowdStrike’s role in global cybersecurity. The widespread adoption of CrowdStrike’s solutions highlights their critical importance and demand.
According to Rosenblatt, this incident is unlikely to impact CrowdStrike’s strong growth trajectory, which is supported by rising cyber threats and its leadership position in endpoint security.
Rosenblatt concludes that the market reaction to the glitch provides investors with an opportunity to buy shares in a high-quality, growth-oriented cybersecurity company at a discount. They feel that “the global technology disruption caused by a faulty CrowdStrike software update, while devastating, represents a compelling buying opportunity for CrowdStrike investors.”
Meanwhile, analysts at RBC Capital told investors in a note that they believe management’s comment that this is not a security incident will be important in terms of customer confidence. “However, for a premium seller in this space with a premium valuation, we are not surprised to see a negative reaction to the stock this morning,” the bank said.
“Historically, we have not seen a strong reaction to pipeline creation or overall demand following cyber incidents at other security companies,” RBC added.
They explained that it currently appears to be more of a process issue than a technology one. However, RBC believes this is a near- to medium-term negative for the company and will likely take some time to resolve.
“At this point, this does not change our long-term positive view of the company, as we continue to view CRWD as a best-in-class cybersecurity platform,” they concluded.