CrowdStrike’s dramatic setback could be Palo Alto’s gain. The software update by CrowdStrike last week caused one of the largest IT blackouts in history, disrupting computers and technology systems worldwide and hammering the cybersecurity company’s reputation. While the risk of CrowdStrike losing existing customers is low, the outage may have an impact on new customer wins, BTIG wrote in a Monday note to clients. Those customers could go to cybersecurity rival — and Club holding — Palo Alto . “We see Palo Alto as a potential beneficiary because maybe they can win some business from that,” said Jeff Marks, the Investing Club’s director of portfolio analysis. Analysts at BTIG said CrowdStrike committed the “cardinal sin” for any security provider by hurting the revenue generation of its customers. Early on Friday, airlines, banks and health-care providers around the world saw their Microsoft Windows devices go offline because of a CrowdStrike-issued update to its Falcon product. This is the platform CrowdStrike designed to prevent cybersecurity breaches using cloud technology, and requires deep access to each computer’s operating system. Microsoft said the incident impacted 8.5 million Windows devices. The effects were so widespread because CrowdStrike’s services are utilized by many Fortune 500 companies. CrowdStrike has said that a fix for the defect has been deployed. Shares of CrowdStrike have taken a beating, plummeting 22.7% since Thursday’s close, including an 11% plunge on Monday following several notable negative Street notes Guggenheim Securities downgraded the stock to a neutral rating from buy on Monday. “With the stock still trading at the highest multiple of recurring revenue across our entire Software coverage, we are stepping away for the time being,” the analysts said. Although it will take time to repair its image, investors with a multi-year horizon can ride it out. Oppenheimer removed CrowdStrike from the firm’s 2024 list of top picks, citing near-term pressure on the stock, while both BTIG and Scotiabank downgraded the stock to hold from buy. Palo Alto shares have yet to see much of a bounce on the news, up just 2.7% since Thursday’s close. Jim Cramer said that the market’s reaction is unwarranted, and shares of the portfolio name should be higher. PANW YTD mountain Palo Alto Networks (PANW) year-to-date performance We’re long-term bullish on Palo Alto because of its stellar leadership with CEO Nikesh Arora at the helm, along with the company’s dominance in its respective market as the only real soup-to-nuts cybersecurity play. Plus, Jim recently said Palo Alto is tied to “one of the greatest secular growth themes,” which ensures more demand for the company’s offerings regardless of the macroeconomic environment. “There are only two companies that do this kind of cloud technology. It’s CrowdStrike.. and Palo Alto, which with this ‘platformization’ strategy has started to do better,” Cramer said. We currently have a 2 rating on Palo Alto shares and a price target of $360. (Jim Cramer’s Charitable Trust is long PANW, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
CrowdStrike makes software to help firms manage their security in IT environments.
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CrowdStrike’s dramatic setback could be Palo Alto’s gain.
The software update by CrowdStrike last week caused one of the largest IT blackouts in history, disrupting computers and technology systems worldwide and hammering the cybersecurity company’s reputation. While the risk of CrowdStrike losing existing customers is low, the outage may have an impact on new customer wins, BTIG wrote in a Monday note to clients.
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