CrowdStrike Holdings Inc. shares dropped more than 10% Monday after Morgan Stanley initiated a sell rating on the cybersecurity stock amid a large majority of buy ratings from Wall Street analysts.
shares sank as much as 13% to an intraday low of $247.75 Monday and at last check were down about 11% in late afternoon trading. CrowdStrike shares are up 93% over the past 12 months, compared with a 38% gain on the ETFMG Price Cyber Security ETF
a 30% gain on the S&P 500 index
and a 34% rise on the tech-heavy Nasdaq Composite Index
In a Monday note entitled “It’s a Matter of Price,” Morgan Stanley analyst Hamza Fodderwala initiated coverage on CrowdStrike with an “underweight” rating and a $247 price target.
While Fodderwala noted that CrowdStrike is a market leader in cloud-based endpoint detection and response, the Morgan Stanley analyst said his checks indicate there are other next-generation competitors in the sector like SentinelOne Inc.
that are offering services at 15% to 20% lower prices.
Morgan Stanley initiated an overweight rating on SentinelOne in late July, after the company went public at the end of June.
“We think this competitive dynamic will make sustaining the current pace of share gains more difficult and drive uncertainty on the pace of topline deceleration through 2022, particularly as WFH-driven tailwinds since last year begin to normalize,” Fodderwala said.
Of the 27 analysts who cover CrowdStrike, 22 have buy ratings, three have hold ratings and two have sell ratings, along with an average price target of $310.13, according to FactSet Research.
Earlier in the month, another analyst, BTIG’s Gray Powell, downgraded CrowdStrike to a neutral rating from a buy, noting increased competition from SentinelOne.