I’m neutral on CrowdStrike (CRWD), a leading cloud-based advanced cybersecurity company. While the business has done a remarkable job recovering from a disastrous technological crisis in July, its valuation has returned to its usual richness. As a result, I believe the future volatility risk remains high, even without further operational mistakes. Based on my valuation model and broader analysis, I see better stocks in the market to buy.
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CrowdStrike Made a Robust Recovery from a Technology Crisis
I’m neutral on CrowdStrike. Many readers will remember that in July 2024, a faulty sensor update from CrowdStrike caused one of the largest IT outages in history, affecting approximately 8.5 million Windows devices globally. The outage resulted in an estimated $5.4 billion in direct losses from Fortune 500 companies alone. As a result, CrowdStrike’s stock dropped from $390 to $220; after recovering, it is now trading at $365.
Despite this setback, CrowdStrike retained 97% of its customer base by emphasizing transparency and demonstrating its commitment to improvement. Management took away three key lessons: the importance of pre-deployment testing, the value of transparent communication to maintain customer trust, and the power of minimizing recovery times through robust incident response.
Following this recovery, CrowdStrike has made significant progress, reporting a 29% year-over-year increase in revenue in Q3 2025. While this growth was slightly tempered compared to previous years due to lingering impacts from the outage, it remains robust. Moreover, in Q3, its annual recurring revenue slowed to 27% year-over-year growth, down from 35% in the prior year.
To retain loyalty and secure long-term deals, CrowdStrike offered “customer commitment packages,” which included discounts through the second half of 2024. This helped secure long-term revenues at the expense of near-term growth rate contractions.
CRWD Stock Appears Fairly Valued with Robust Growth Prospects
I’m neutral on CrowdStrike. While the faulty sensor update was destabilizing for investors, I consider another crisis of this magnitude unlikely, given how alert management has become. Therefore, I’ve used a 10-year period for my valuation model.
I conservatively forecast that the company will achieve a 20% revenue CAGR over the next 10 years, leading to a December 2034 trailing 12-month revenue of $23.16 billion. Several established cybersecurity firms report EBITDA margins exceeding 25%, so to remain conservative, I’ve used this as my terminal EBITDA margin. This results in a December 2034 EBITDA estimate of $5.79 billion for CrowdStrike.
Due to scaling EBITDA, the company’s EV-to-EBITDA ratio is likely to contract significantly over the next 10 years. A ratio of 25 is a conservative terminal multiple, aligning with what other mature cybersecurity stocks trade at. Applying this to my December 2034 EBITDA estimate, I project an enterprise value of $144.75 billion for the year. Given the company’s current enterprise value of $86.63 billion, this indicates a 5.27% CAGR over the next 10 years.
CrowdStrike’s weighted average cost of capital is 9.15%, with an equity weight of 99.13% and a debt weight of 0.87%, equity costing 9.21%, and debt at 3.29% after tax. Discounting back my estimate of the 2034 enterprise value using this rate gives an implied intrinsic enterprise value of $60.31 billion. This suggests a -30.38% margin of safety for investment.
Based on my calculations, I consider an investment in CrowdStrike imprudent, despite its strong recovery from the faulty sensor update.
CrowdStrike’s Valuation Could Fall in Macroeconomic Distress
I’m neutral on CrowdStrike, though some readers may consider my estimates overly conservative. However, I believe my caution is justified. The company currently has a trailing 12-month EV-to-EBITDA ratio of 618.25 and a trailing 12-month price-to-book ratio of 29.45. This extremely rich valuation may persist over the next 10 years, and if it trades at an EV-to-EBITDA ratio of 30-35 in 2034, it would be more fairly valued today. However, there is no guarantee of this.
Moreover, in the event of a recession or severe economic crisis, CrowdStrike could experience a much sharper decline in stock price compared to other, more reasonably valued businesses. This is why I believe an investment in CrowdStrike is only suitable for long-term investors willing to take on high levels of risk. Yet, in my opinion, this is unwise.
Is CrowdStrike a Buy or Sell?
Wall Street analysts have a consensus Strong Buy rating on CrowdStrike, with 30 Buy ratings, six Hold ratings, and zero Sell ratings. The average CRWD price target is $376.79, indicating a 6.6% upside potential over the next 12 months. Such a modest return showcase the stock’s susceptibility to further volatility.
Conclusion: There Are More Appealing Investments
CrowdStrike deserves credit for its robust recovery; however, the stock is now trading near its pre-crisis price, leaving little room for a value-based investment. As a result, long-term returns appear weak. Additionally, in the event of a major operational crisis or recession, I believe CrowdStrike’s valuation would be among the most affected across all industries due to its high trading price.
