Shares of CrowdStrike Holdings Inc. were on track for their worst day ever as new subscriptions grew more slowly than expected, prompting a majority of analysts to cut price targets on the cybersecurity company and debate whether its broader enterprise spending outlook was a risk. CrowdStrike
shares dropped as much as 21% Tuesday and were last down 18% in afternoon trading, topping their previous worst day — March 16, 2020, which saw a 16.5% drop — since the stock went public in June 2019.
Late Monday, CrowdStrike said it only took in $198.1 million in net new annual recurring revenue, or ARR, in the third quarter — about $10 million short of what it and Wall Street expected — because of the way deferred revenue is structured in many large contracts. ARR is a software-as-a-service metric that shows how much revenue a company can expect based on subscriptions. CrowdStrike reported a 54% ARR increase to $2.34 billion from the year-ago quarter, while Wall Street expected $2.35 billion. Of the 38 analysts who cover CrowdStrike, 35 have buy ratings on the stock and three have hold ratings. Of those, 24 cut their target prices, resulting in an average target price of $183.03, compared with a previous $237.18, according to FactSet data. Morgan Stanley analyst Hamza Fodderwala, who has an overweight rating on the stock, told investors to “buy the dip.” Fodderwala said “estimates now appropriately derisk for macro [and] positioning as growing consolidator enables stronger share gain vs peers.” The Morgan Stanley analyst said that “for a scaled high-growth [software-as-a-service] company” like CrowdStrike, “a meaningful slowdown is already priced in.” As for smaller customers, spending decisions are likely being delayed. That puts some heat on CrowdStrike, as it raises the risk of increased compet …