CrowdStrike stock heading to $324? 1 Wall Street analyst thinks so.

This year has been full of ups and downs for the cybersecurity company CrowdStrike (CRWD 2.99%) and its shareholders.

From January 1 to July 18, CrowdStrike stock gained 34% — outpacing the absolute S&P 500 and Nasdaq Composite. Just a few weeks before, it had climbed to a new all-time high of $398.33 per share.

But on July 19, everything changed. A bug found in one of CrowdStrike’s software updates caused widespread disruption to its platform. As a result, 8.5 million systems running on CrowdStrike’s cybersecurity protocols were affected, and the stock began to crash in spectacular fashion.

Since news of the outage broke on July 19, CrowdStrike shares have rebounded somewhat, but are still down more than 25% from their summer peak.

And yet, even with the reputational damage from the incident and volatile trading for CrowdStrike stock, Goldman Sachs Equity research analyst Gabriela Borges recently raised her price target for the company from $295 to $324 — implying an 11% upside from current levels.

Let’s dig into the full picture at CrowdStrike and assess whether now is a good time to load up on the stock.

Thinking about the big picture

One thing to know about the stock market is that the buying and selling activity is often disconnected from the underlying fundamentals of the company. Investors often allow the story of a stock to take precedence over the quality of its business.

This disconnect is usually on full display during periods of extreme volatility, such as black swan events, including CrowdStrike’s general outage.

Not long ago, I wrote an article about recession-proof companies and outlined how MicrosoftHis business grew exponentially during the Great Recession and how demand for CrowdStrike’s cybersecurity offerings increased during the COVID pandemic.

At the time, you may have thought the Great Recession and the pandemic were good times to sell growth stocks. But think about it another way: Both Microsoft and CrowdStrike offer services and products that businesses need — regardless of the state of the economy.

While CrowdStrike’s recent outage was upsetting, it’s unlikely that the company’s tens of thousands of subscribers will cancel their contracts and switch to other providers en masse.

Image source: Getty Images.

How Can CrowdStrike Come Back?

That doesn’t mean the company will see zero consequences as a result of the incident. During CrowdStrike’s earnings call in late August, management explained that it is implementing a retention strategy that revolves around “customer engagement packages.” Of course, these packages include features like price discounts, flexible payment terms, and a focus on professional services to help better understand customer use cases.

The purpose of these packages is to build more customer loyalty during an otherwise tumultuous time for the company. While CrowdStrike’s short-term growth will be stunted to some extent, the long-term opportunities created by this effort also have significant potential.

Based on early indications from CrowdStrike’s post-disruption revenue post, the company should ultimately retain the vast majority of its customers, while its new engagement strategy can fuel stronger customer relationships and strengthen brand equity.

Is CrowdStrike Stock a Buy Right Now?

Evaluating CrowdStrike is hard. Although the company is profitable, the net income is quite small. This makes valuing stocks on a price-to-earnings (P/E) basis somewhat impractical.

The chart evaluates CrowdStrike against a set of industry peers on a price-to-sales (P/S) basis.

Data by YCharts.

CrowdStrike is the most valuable stock in this cohort on a P/S basis, despite its July selloff.

Like Borges, I agree that better days are ahead for CrowdStrike. Cyber ​​security is a product that will continue to witness strong secular winds for many years to come, and the company is taking the right steps to maintain its market leadership position. Now may be a good time to take advantage of the selloff, but given the near-term uncertainty, investors should prepare to hold the stock for the long term.