CrowdStrike’s Rally Is Splitting Wall Street. Why This Analyst Still Backs It.

The stock has more than recovered its losses since plunging in June. (dreamstime)

CrowdStrike Holdings is among the technology companies whose stocks are riding the artificial-intelligence trend to new highs. That is provoking division on Wall Street but the cybersecurity company is well placed to continue its rally, according to analysts at Wedbush.

“CrowdStrike remains one of our favorite tech names and we are seeing deal momentum spread with AI also a clear tailwind for this well positioned tech leader,” wrote Wedbush analyst Daniel Ives in a research note on Thursday.

Ives raised his target price on CrowdStrike to $575 from $525, maintaining an Outperform rating. The stock was up 4% at $515.58 in morning trading, having risen 45% this year so far as of Wednesday’s close. That puts it on track for a record closing high.

The stock has more than recovered its losses since plunging in July last year, when a defective software update by CrowdStrike disabled 8.5 million Windows PCs. It has also brushed off an initial poor reaction to its most recent earnings report last month. Revenue growth and guidance came in slightly short of expectations.

Created with Highcharts 9.0.1CrowdStrike Source: FactSetAs of July 17, 4 p.m. ET

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That has led to analysts at Mizuho Securities and BofA Research downgrading CrowdStrike stock to Neutral in recent weeks, based largely on its valuation. CrowdStrike trades at close to 24 times its per-share sales expected for the next 12 months.

However, Wedbush’s Ives is brushing off those concerns, arguing that strong deal flow in its most recent quarter is accelerating in the current period.

After establishing its market position in endpoint security—protecting the connection between a corporate network and devices that workers use—CrowdStrike is broadening out into various areas such as cloud security, identity protection, and analytics. It is also integrating AI into various products, including a tool called Charlotte AI that acts as a virtual assistant for users of its Falcon platform.

“We believe the Street is underestimating the growth potential for CrowdStrike as a second/third derivative beneficiary of the AI Revolution and this speaks to our core bullishness in the name continuing from current levels,” Ives wrote.

CrowdStrike isn’t one of the holdings in the Dan Ives Wedbush AI Revolution ETF, an exchange-traded fund recently launched by Wedbush Fund Advisers. The ETF is built around research from Ives and made up of 30 companies he has identified as beneficiaries from the AI trend. Cybersecurity companies Palo Alto Networks, CyberArk Software and Zscaler are held by the ETF.

Write to Adam Clark at adam.clark@barrons.com