Prediction: You'll Regret Not Buying the CrowdStrike Dip

I’ll go ahead and say what everyone is thinking: Causing the largest global IT outage in history is bad. Unfortunately, that’s what CrowdStrike (CRWD -3.85%) did on July 19, and its stock has taken a huge hit because of it.

Since hitting a peak on July 8, CrowdStrike’s stock is down close to 30% (as of Aug. 30). That’s bad news for investors with shares before then, but it’s an opportunity for people looking to begin or increase a stake in the cybersecurity company.

It’s one thing for a stock to plunge because something fundamentally changed with its business; it’s a different story when it happens because of a (very unfortunate) mishap. With CrowdStrike seemingly falling into the latter category, I think the market overreacted, and investors should consider buying the current dip.

CrowdStrike likely won’t lose a lot of high-dollar customers

In the second quarter of its fiscal year 2025, ended July 31, CrowdStrike reported encouraging customer numbers. Instead of focusing on the total number of customers, I want to point out how many of CrowdStrike’s customers use multiple of its modules (what it calls different security tools).

Specifically, it’s worth pointing out that 48% of CrowdStrike’s customers with at least $100,000 in annual recurring revenue (ARR) use at least eight of its modules. CrowdStrike has a good base of high-dollar customers (62 of the Fortune 100 use it for cloud security), and it’s not easy for larger companies to completely switch cybersecurity providers.

Changing cybersecurity providers isn’t the easiest task for large companies because of how integrated it usually is in their systems. It often takes a lot of time and resources, giving companies a reason to pause before making huge moves.

Since CrowdStrike’s mistake was caused by a software update mishap and not a security breach, there aren’t too many reasons to question whether the event reflects its products’ effectiveness. CrowdStrike’s solutions are just as effective as before the IT outage, so I don’t see its customers up and leaving in droves.

You can’t argue with CrowdStrike’s financial performance

For companies like CrowdStrike that rely on subscriptions, it’s important to look at metrics like ARR and free cash flow, and CrowdStrike is performing well in both areas. In the latest quarter, it has over $3.85 billion in ARR, up 32% year over year, after adding $218 million during that time.

Its free cash flow grew 44% year over year to hit $272 million, continuing momentum that’s been going strong over the past five years. Its free cash flow is surging much faster than its revenue, which itself has grown impressively over that span.

CRWD Revenue (Quarterly) data by YCharts

Strong ARR and free cash flow give CrowdStrike the financial flexibility it needs to weather this current storm while also reinvesting in the business and strengthening its offerings.

An intriguing entry point

Even after the recent plunge, CrowdStrike’s stock isn’t “cheap” by most standards. Its 19.5 price-to-sales (P/S) ratio is higher than many of its top competitors but well below its average over the past five years.

CRWD PS Ratio data by YCharts

CrowdStrike’s low(-er) P/S ratio alone doesn’t make it a buy during the dip, but it does make it more attractive, given CrowdStrike’s revenue projections. It expects revenue to come in between $3.89 billion and $3.9 billion, which would be a 27% to 28% year-over-year growth rate.

There’s no denying the short-term questions surrounding CrowdStrike, but its strong customer base and financial performance are reassuring that whatever happens will be a shorter-term issue. If you don’t take advantage of this low-priced opportunity, you will probably kick yourself in a few years.

Decide how much you’re willing to invest in the company and divide it up in increments. This could help shield against any sudden drops and offset the effects of potentially high volatility.