Piper Sandler Downgrades CrowdStrike on Valuation Concerns

Piper Sandler downgraded CrowdStrike (NASDAQ:CRWD) to Neutral from Overweight, citing concerns over valuation despite maintaining a positive outlook on the company's prospects.

The analysts noted that CrowdStrike shares have reached the highest revenue multiple among public software companies with a market cap above $75 billion. They stated that there isn't a near-term catalyst to justify raising their $400 price target.

This downgrade is primarily based on valuation. Piper Sandler recognized CrowdStrike's strong performance and momentum but believes that the current stock price has already factored in much of the anticipated future growth.

The firm highlighted CrowdStrike's significant scale, with an annual recurring revenue (ARR) of $3.6 billion and a fiscal 2025 revenue forecast surpassing $4 billion. They suggested that as CrowdStrike grows larger, achieving substantial upside becomes more challenging due to the "law of large numbers," potentially causing its returns to lag behind other cybersecurity firms.

Despite the downgrade, Piper Sandler analysts remain optimistic about CrowdStrike's future, particularly in its cloud, identity, logging, and IT offerings. They praised CrowdStrike's impressive execution and strong metrics but believe the current stock price already reflects this optimism.