In the trading period of US stocks on Tuesday, the leader of cybersecurity industry, CrowdStrike (CRWD.US), fell more than 12% at one point, and finally fell more than 9% to $233.65 at the close of US stocks on Tuesday. Needham, a well-known investment institution on Wall Street, said that the significant event of Windows operating system crash caused by sensor configuration update will become a thing of the past, but it will take some time for the reputation impact of the crash event to dissipate, and CrowdStrike will pay a certain degree of price in both stock price and fundamentals in the next year. Needham still maintains a "buy" rating for CrowdStrike stock, but the target price has been lowered from $425 to $375.

The poor software update by the cybersecurity leader CrowdStrike caused a brief global crash of the Microsoft Windows operating system, causing major impacts on various industries globally, including flight cancellations, cancellation/interruption of medical procedures, financial service interruptions such as stock trading, and significant impacts such as the suspension of important programs, resulting in the worst two-day continuous decline in its stock price in history.

However, Needham's analysis team headed by Alex Henderson still emphasized that they believe that CrowdStrike is the best company in terms of comprehensive ability among similar cybersecurity companies, and pointed out that CrowdStrike's handling of such major network events has always been praised as a public model.

They also stated that CrowdStrike's reputation damage may gradually disappear next year, and the impact on its market share will also disappear. Analysts predict that due to the important customers like Delta Air Lines claiming compensation after the event, it will take at least a year to restore the total revenue scale, net new ARR and sales plan for new cybersecurity products to the slightly slower growth trend line before the event.

Analysts believe that this scale of reputation damage will be reflected in the obstruction of customers' strong reliance on a single platform, as this choice brings concentrated cybersecurity risks.

According to media reports, the US aviation giant Delta Air Lines (DAL.US) hired a law firm quickly to seek compensation after the CrowdStrike and Microsoft (MSFT.US) operating system failure incident on July 19. As the Windows operating system crash event caused the software system of the airline to be paralyzed for several days, the airline is seeking compensation from these two technology giants.

Henderson and his team have significantly lowered their future expectations for CrowdStrike's revenue scale, ARR, and EPS. They also believe that cash may impact the balance sheet as a one-time fee against assets.

Needham's analysis team is not surprised that Delta Air Lines is seeking compensation from CrowdStrike and Microsoft. Analysts have also lowered their expectations for the company's P/E ratio.

However, despite these adjustments, the Needham analysis team still believes that CrowdStrike will become a major platform in the security field. They still believe that the CrowdStrike stock will remain the core holding of growth investors after the impact of the crash event begins to fade.

In addition, the Needham analysis team pointed out that some CrowdStrike customers, although irritated, still remain loyal to the company's cybersecurity platform, especially after the company launched its highly efficient "AI + cybersecurity service".

According to statistics, after soaring more than 140% in 2023, CrowdStrike, one of the "AI bull stocks" in the US stock market, has risen by as much as 40% so far this year before the crash event, mainly because investors expect global enterprise investments in cybersecurity to continue to rise, and CrowdStrike's valuation is expected to rise as global AI investment frenzy continues to increase.

CrowdStrike strives to fully integrate its groundbreaking generative AI technology into its cybersecurity platform services, especially by introducing an AI security analyst named "Charlotte". This function aims to empower every user of the CrowdStrike Falcon platform to quickly create network security workflows based on generative AI support.

Through questioning and interacting with Charlotte, a virtual AI analyst, users can easily and quickly access major core modules to get real-time information on cybersecurity vulnerabilities, threat factors, and other security issues, significantly enhancing the platform's effectiveness and user experience with low-threshold operations. The multi-model architecture behind Charlotte AI continuously learns and optimizes from high-fidelity security data, threat intelligence, and expert-labeled security events, providing fast and accurate answers. With promptbooks and command line analysis features, Charlotte AI can significantly accelerate the operation of Security Operations Centers (SOCs) and effectively assist cybersecurity platforms in responding to security threats faster and more accurately.

After the outage event, analysts have noted that customers are generally very frustrated, calling it a "complete nightmare" that disrupted their business during the busiest travel and shopping period of the year.

However, the Needham analyst team pointed out that these customers remain committed to CrowdStrike's cybersecurity platform and that they are still loyal customers of EDR (endpoint detection and response), but analysts also said that some expansion projects have been delayed due to this incident.

Henderson and his Needham analyst team believe that the impact of these events will ultimately be a thing of the past. Although new ARR, net expansion, and new identifications may be under pressure in the short term, analysts have lowered their target stock price for CrowdStrike in the next 12 months, but they do not believe that this will be a milestone event of massive customer loss. The analyst team emphasized that as time goes by, CrowdStrike should be able to correct its mistakes, correct internal processes, completely dispel the concerns of important customers and ultimately restore a normalized business growth pattern.