CrowdStrike Stock (CRWD) Stock; Drops Almost 6% After Bank of America Downgrades to Hold

TLDR;

CrowdStrike stock fell after BOM downgraded it to Hold, citing limited valuation upside and slowing growth The downgrade follows mixed fiscal 2026 results and weaker-than-expected revenue Despite setbacks, CrowdStrike’s annual recurring revenue and earnings per share beat expectations, but operating expenses have risen. Analyst opinions remain divided, with some seeing value in the premium valuation while others urge caution amid growth risks.

Shares of CrowdStrike Holdings Inc. (NASDAQ: CRWD) dropped sharply on Tuesday, closing at $460.56, down $28.20 or 5.77%, after Bank of America downgraded the cybersecurity giant from “Buy” to “Hold.” The drop comes after the investment bank raised concerns about the company’s stretched valuation and slowing revenue growth, casting doubt on near-term upside potential.

Notably, the downgrade follows mixed fiscal 2026 results and weaker-than-expected revenue guidance due to transitional customer incentive programs. Despite setbacks, CrowdStrike’s annual recurring revenue and earnings per share beat expectations, but operating expenses have risen. Analyst opinions remain divided, with some seeing value in the premium valuation while others urge caution amid growth risks.

CrowdStrike Holdings, Inc. (CRWD)

Valuation Concerns Temper Optimism

Bank of America analyst Tal Liani pointed to the current valuation of CrowdStrike as a key reason for the downgrade. The stock trades at roughly 20 times Enterprise Value to sales for fiscal year 2026, which Liani views as leaving limited room for meaningful price appreciation.

While acknowledging CrowdStrike’s strong fundamentals and growth prospects, the analyst noted that revenue growth is decelerating. First-half fiscal 2026 results showed growth slowing to below 20 percent, with second-quarter revenue guidance coming in at 19 percent. This forecast missed Wall Street estimates by a notable margin, partly due to transitional challenges involving customer incentive programs and partner program amortization.

Lingering Impact from Previous Setbacks

CrowdStrike is still managing fallout from a significant cybersecurity outage last year that affected major industries like airlines, banks, and hospitals. The company introduced incentive packages aimed at retaining customers impacted by that outage, but these programs weighed on subscription growth and revenue throughout the first quarter and are expected to continue to do so for the rest of the fiscal year.

Additionally, U.S. regulators have sought information regarding the outage and related transactions, adding another layer of scrutiny. Despite these hurdles, CrowdStrike has made progress in rebuilding its reputation and maintaining momentum within a highly competitive market.

Mixed  Sentiment on CrowdStrike Future

Not all analysts agree with Bank of America’s cautious stance. While BofA raised its price target slightly to $470 from $420 to reflect sector-wide valuation expansions, other firms remain bullish. UBS analyst Roger Boyd maintained a Buy rating with a $545 price target, arguing that CrowdStrike deserves a premium multiple due to its accelerating revenue growth and expanding free cash flow. Overall, Wall Street consensus shows moderate optimism, with a majority of analysts recommending Buy or Hold and the average price target implying a modest upside from current levels.

CrowdStrike Financial Performance and Outlook

Despite the recent setback in stock price, CrowdStrike’s financial performance continues to impress in some areas. The company reported a 20 percent year-over-year revenue increase in the first quarter of fiscal 2026, with annual recurring revenues growing 22 percent. Earnings per share exceeded estimates, although total revenue slightly missed consensus.

Operating margins have contracted somewhat due to increased investments in sales, marketing, and research and development, reflecting management’s commitment to long-term growth. While management expects growth to pick up again in the second half of the year, concerns about the sustainability of that momentum and valuation pressure remain top of mind for investors.

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