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CrowdStrike Holdings, Inc.’s (NASDAQ:CRWD) security calamity that disabled Microsoft Corp (NASDAQ:MSFT) computers at airports, banks and other places almost two weeks ago may hurt the company for the next year, according to an analyst.
On July 19, thousands of Microsoft screens worldwide suffered the “blue screen of death” after CrowdStrike installed a faulty security update onto its Falcon Sensor software.
Needham analyst Mark Henderson said he expects the major error will negatively impact the company’s revenue and upsell as customers think twice about using CrowdStrike to protect their computers from cyberattacks.
“We think the damage will manifest in hindered customer willingness to rely heavily on singular platforms, as that choice introduces concentration risk,” he wrote in a note on Tuesday.
“We think the damage to Crowd’s reputation will fade over the next year, as will the impact to its market share.”
Needham still expects its annual revenue to grow 29.7% in fiscal 2025 to $3.96 billion and then another 23.7% to in fiscal 2026 to $4.9 billion and maintains a Buy rating on CrowdStrike’s shares, but did lower the price target from $425 to $375.
“We also think it’s likely there will be a Cash hit to the Balance Sheet in the form of a one-time charge,” Henderson wrote.
Read Also: Microsoft Outage: What States, Services, Companies Saw The ‘Blue Screen Of Death’
Delta Air Lines, Inc. (NYSE:DAL) has hired a law firm to seek compensation from CrowdStrike and Microsoft over the global IT outage that caused Delta to cancel more than 2,200 flights on July 19 and more than another 6,000 flights since that day, Reuters reported.
“We are not surprised by news Delta is looking to the courts for compensation,” Henderson said.
CrowdStrike’s stock, which had more than doubled in 2023, has fallen over 24% since the outage, leading to a loss of over $20 billion in market valuation.
Despite the mammoth glitch on July 19, CrowdStrike’s customers are still sticking by the company, which they consider “the kings” of endpoint detection and response on cyberattacks, Henderson said.
Customers are angry but still committed to CrowdStrike’s platform,” he said.
“Customers we spoke with displayed immense frustration over the outage, depicting it as a ‘total nightmare’ disrupting their business during one of the year’s busiest travel and shopping periods,” wrote Henderson.
CrowdStrike is delaying expansion projects, according to Needham’s sources, due to the colossal mishap but does not consider it to be “a landmark churn event” for the company, Henderson said.
“Over time, Crowd should be able to right its wrongs, correct internal processes, reassure customers and eventually return to business as usual,” he wrote.
Price Action: CrowdStrike has dropped 11.85% to $228.15 as of Tuesday’s mid-day trading. Microsoft has slipped 1.79% to $419.05
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