Can CrowdStrike (CRWD) Turn The Tide Around With Its Earnings?

These analysts are anticipating a clearing event for CrowdStrike, but will CrowdStrike able to over the challenges stemming from the recent IT outage linked to a CrowdStrike update for Windows, and provide a better-than-expected revenue growth.

CrowdStrike will release earnings AMC on Wednesday, 28 August, 2024.The consensus among the analysts for the expected earnings (EPS) is $0.98.

Jefferies expects the company to report approximately 31% year-over-year ARR (Annual Recurring Revenue) growth. But I think the focus is for the future on the FY25 guidance and its implications for future growth. Jefferies predicts that CrowdStrike will guide FY25 ARR growth to around 24-25%, slightly below the consensus estimate of 25.4%.

Since the outage occurred near the end of Q2, cancellations from existing customers probably won't affect ARR immediately. However, ARR will be affected by existing customers neglecting to spend more by adopting additional products. A lack of new customers will also be evident.

So we might be seeing CrowdStrike to revise their $10 billion ARR target, then we could be expecting weaker ARR in future quarterly earnings. With these declining ARR which might not be seen until the end of 2024, we might expect CrowdStrike to implement some cost cutting measure to keep it profitable.

If the cut is in growth initiatives like marketing, and that could deal a bigger blow to future ARR.

As we have seen CrowdStrike giving better or fearless guidance in the past, but this time we need to know that the possibility of CrowdStrike issuing more conservative guidance due to the impact of IT outage being felt more even though the incident only happen two weeks of fiscal second quarter.

The approach of more conservative guidance might help to manage the expectations and encourage investors to support the stock, putting the IT outage aside.

The CrowdStrike stock price fell by -2.04% on the last day (Thursday, 22 Aug 2024) from $273.21 to $267.64. During the last trading day the stock fluctuated 4.21% from a day low at $267.23 to a day high of $278.47.

The price has risen in 7 of the last 10 days and is up by 11.28% over the past 2 weeks. Volume fell on the last day along with the stock, which is actually a good sign as volume should follow the stock. On the last day, the trading volume fell by -808 thousand shares and in total, 4 million shares were bought and sold for approximately $1.18 billion.

The stock lies the upper part of a very wide and falling trend in the short term, and this may normally pose a very good selling opportunity for the short-term trader as reaction back towards the lower part of the trend can be expected.

A break up at the top trend line at $270.85 will firstly indicate a slower falling rate, but may be the first sign of a trend shift. Given the current short-term trend, the stock is expected to fall -35.12% during the next 3 months and, with a 90% probability hold a price between $119.90 and $175.73 at the end of this 3-month period.

CrowdStrike finds support from accumulated volume at $263.91 and this level may hold a buying opportunity as an upwards reaction can be expected when the support is being tested.

This stock may move much during the day (volatility) and with a large prediction interval from the Bollinger Band this stock is considered to be "high risk". During the last day, the stock moved $11.24 between high and low, or 4.21%. For the last week, the stock has had daily average volatility of 2.94%.

The CrowdStrike stock is overbought on RSI 14 and lies in the upper part of the trend. Normally this may pose a good selling opportunity for the short-term trader, but some stocks may go long and hard while being overbought. Regardless, the high RSI together with the trend position increases the risk and higher daily movements (volatility) should be expected.

Furthermore, there is a buy signal from the 3 month Moving Average Convergence Divergence (MACD). Some negative signals were issued as well, and these may have some influence on the near short-term development. The CrowdStrike stock holds a buy signal from the short-term Moving Average; at the same time, however, the long-term average holds a general sell signal. Since the long term average is above the short-term average there is a general sell signal in the stock giving a more negative forecast for the stock. On further gains, the stock will meet resistance from the long-term Moving Average at $285.89. On a fall, the stock will find some support from the short-term average at $264.77. A break-up through the long-term average will give another buy signal, while a fall below the short-term average will add another sell signal and strengthen the general signal.

A sell signal was issued from a pivot top point on 21 Aug 2024 and so far it has fallen -2.04%. Further fall is indicated until a new bottom pivot has been found. Volume fell together with the price during the last trading day and this reduces the overall risk as volume should follow the price movements.

A correction down in the nearby future seems very likely and it is of great importance that the stock manages to break the trend before that occurs.

For the upcoming trading day on Friday (23 Aug), we could expect CrowdStrike to open at $271.11, and during the day (based on 14 day Average True Range), to move between $255.53 and $279.75, which gives a possible trading interval of +/-$12.11 (+/-4.52%) up or down from last closing price.

If CRWD takes out the full calculated possible swing range there will be an estimated 9.05% move between the lowest and the highest trading price during the day.

Since the stock is closer to the resistance from accumulated volume at $268.88 (0.46%) than the support at $263.91 (1.39%), the trading risk/reward for intra-day is not attractive and I think we might want to wait till CRWD is nearer to the support level (S1, S2, S3).

CrowdStrike holds several negative signals and over the next few days or week building up to its earnings report, we could be see CRWD perform weakly. So I am expecting CRWD to be trading downside.

I will be monitoring for a good entry point when we see stock price nearer to the support level.

Appreciate if you could share your thoughts in the comment section whether you think CRWD would continue to trade weaker and wait for it to trade near the support level.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.