It’s been a tough few weeks for CrowdStrike (CRWD 1.03%).
A major endpoint cybersecurity provider experienced the largest crash in its history, which some believe to be the largest IT outage in history.
CrowdStrike’s buggy software update crashed Microsoft Windows operating systems around the world, causing major disruption to global industries including airlines, broadcasters and retail.
CrowdStrike’s stock price also plummeted as a result, falling 11% on July 19 and another 13.5% on July 22 as the software issues lingered after the weekend. By the end of the week, the stock price had fallen another 3%, making it more than 25% lower than it was before the outage.
Given the company’s reputational damage and potential challenges in retaining and attracting new customers, the sharp drop in its stock price seems unsurprising.
But smart investors also know that these types of offerings can be good buying opportunities, as the stock price may recover losses as coverage of the incident fades and CrowdStrike returns to business as usual.
So, should you buy CrowdStrike now, or wait until the company’s situation becomes clearer? To answer that question, let’s look at CrowdStrike’s situation after the outage.
Image source: Getty Images.
The road to recovery
There was some good news for CrowdStrike investors last week: CEO George Kurtz said Friday that nearly all of its connected devices — about 97% — are back online.
CrowdStrike will likely need to take damage control measures to assure customers that it is reliable and that this issue, which was a software update error rather than a cyberattack, will not happen again.
However, there are reasons to believe that companies will overcome this mistake over time. First, increased awareness of CrowdStrike and its global IT infrastructure could lead to increased hiring and spending on cybersecurity and IT infrastructure. Companies may also choose multiple cybersecurity services, creating redundancies to protect themselves.
There’s another reason to believe CrowdStrike stock can recover from its recent decline.
Spending on cybersecurity isn’t going away and will continue to grow, with customers able to choose from endpoint cybersecurity software from CrowdStrike, competitors like Palo Alto Networks, SentinelOne, and even Microsoft’s own.
But the stock price recovered as other companies also faced challenges such as power outages and negative media attention.
One of the most well-known data breaches was the Equifax incident in 2017, which exposed the personal information of 147 million people. The company’s stock price plummeted following the news, but recovered almost all of its losses six months later.
Cloud identity specialist Okta has also suffered multiple breaches since 2022, but its shares have been trending higher since then.
That’s not to say the CrowdStrike incident wasn’t important: the company’s reputation has taken a hit. Some customers may switch to rivals, and the company may have to spend more on controls to ensure this doesn’t happen again and to reassure customers.
Should I buy CrowdStrike now or wait?
CrowdStrike’s stock price would naturally fall due to a faulty software update, but a 25% drop seems excessive.
The cybersecurity stock remains expensive, trading at 19 times sales, but it’s growing fast, with revenue up 33% in the most recent quarter, and it also has strong profit margins, adjusted for stock-based compensation.
CrowdStrike stock could fall further given its high valuation, but the sell-off caused by a temporary news event looks like a good opportunity to buy the stock. A smart approach would be to open a small position and save some cash to buy if the stock falls further.
Despite the recent setback, CrowdStrike’s long-term outlook remains bright, and don’t be surprised if the stock starts to recover in the coming weeks as investors anxiously await the company’s earnings report in a month’s time.
Jeremy Bowman has invested in Okta. The Motley Fool has invested in and recommends CrowdStrike, Microsoft, Okta, and Palo Alto Networks. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
