CrowdStrike Stock Gets a Downgrade. Valuation ‘Looks Full,’ Says Morgan Stanley.

Crowdstrike Holdings signage at the New York Stock Exchange. (Michael Nagle/Bloomberg)

After a big rally in CrowdStrike Holdings’ stock price, Morgan Stanley says investors can find better opportunities elsewhere.

On Monday, analyst Keith Weiss lowered his rating for CrowdStrike stock to Equal Weight from Overweight. He raised his price target slightly to $495 from $490.

We are “stepping to the sidelines given full valuation,” he wrote in a note titled “Take a Pause as Valuation Looks Full.” “The second-half acceleration we expect now looks well priced in the shares.”

In early trading Monday, shares of the cybersecurity firm fell 0.2% to $477.39. The company did not respond to a request for comment on the report.

The analyst cited how security software has become one of the “most defensive” areas of technology spending at corporations, citing Morgan Stanley’s recent survey results from CIOs. He sees sustainable 25% free-cash-flow annual growth for CrowdStrike over the next three years.

But Weiss noted the stock now trades at 21 times enterprise value to 2026 estimated sales versus the large-cap software average of 12 times.

“We see balanced risk-reward at current levels,” he wrote.

CrowdStrike stock is up 39% so far this year, compared with a 7% rise for the Nasdaq Composite.

Write to Tae Kim at tae.kim@barrons.com