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CrowdStrike Stock (CRWD) Introduction
On July 19th, 2024, all hell broke loose in Australia, Japan, Europe, North America, and the rest of the world with a CrowdStrike crash. The chaos began when CrowdStrike, a major cybersecurity company, released a faulty sensor configuration update to Windows systems.
This update led to system crashes and blue screens of death (BSOD) on affected systems. After the fix was identified and corrected, the outage continued to impact many systems worldwide.
This incident has been described as potentially the largest IT outage in history, negatively impacting millions of Windows systems globally and causing widespread disruption across various industries and services.
It only takes one mistake to cause complete chaos in the financial markets and several industries dependent on technology to work properly (or even at all!).
How does this critical mistake impact the future of CrowdStrike and the rest of the cybersecurity industry? How will companies and markets react to this event? Let’s find out.
CrowdStrike Crash - July 19, 2024
So what exactly happened with the CrowdStrike crash on July 19th, and how did it affect different companies and industries? A faulty software update to CrowdStrike’s Falcon Sensor product on Windows PCs and servers caused the global outage.
I won’t get into the technical details, but let’s try to imagine how many companies use Windows….a lot. Organizations primarily use CrowdStrike’s software. Therefore, most personal Windows PCs were unaffected. The crash did not impact Linux and macOS users.
The scale of this incident was unprecedented in the history of information technology:
- Nearly 8.5M Microsoft Windows operating systems crashed worldwide.
- The financial damage caused by this outage is estimated to be at least $10B.
Here are several sectors and critical services that were affected:
- Healthcare: Hospitals experienced significant disruptions, with medical procedures delayed.
- Aviation and transportation: Airlines and airports faced major issues, leading to flight cancellations and stranded passengers. Delta’s CEO claimed that the outage cost the company over $500M and negatively affected its brand reputation.
- Finance: Impacting Banking transactions and stock markets (the NASDAQ lost 0.8%, the S&P 500 lost 0.7%, and the DJIA fell 0.9%).
- Retail: Many stores couldn’t sell or update anything.
- Manufacturing: Since a large portion of manufacturing is robotized, production lines and processes were affected.
- Media: Broadcasters went off the air, which disrupted news and entertainment services.
- Government services: Impacting Emergency services and government websites.
CrowdStrike Stock Crash Consequences
Since the CrowdStrike crash, their stock price has decreased by over 30%. And the bears are feasting. Several Wall Street analysts downgraded the stock, citing concerns about potential resistance to new deals and damage to the company’s reputation.
The company is getting ready to deal with the long-term consequences of the incident (legal liabilities, reputational damage, and impact on future business).
Will Clowdstrike’s Falcon platform remain as popular? Its features include endpoint protection, threat intelligence, incident response, ransomware protection, security services, and other products essential for businesses globally.
This incident may cause companies to rethink the way they conduct business. They might not solely rely on CrowdStrike but partner with some of its rivals and newcomers. Let’s take a look at a few.
Have You Heard of Wiz?
Wiz is a name to remember to since the CrowsStrike crash. They’re a cloud security startup specializing in analyzing cloud infrastructure for risk factors that could allow malicious actors to gain control of resources or steal data.
The company’s platform supports major cloud providers such as AWS, Microsoft Azure, Google Cloud Platform, and Oracle Cloud Infrastructure. The company’s ability to rapidly identify and mitigate cloud vulnerabilities has attracted a significant customer base, including many Fortune 500 companies.
Wiz was founded during the pandemic in January 2020 and quickly grew thanks to its technological advancements and strategic acquisitions (Raft and Gem Security).
After 18 months in business, the company claimed to have reached $100M in annual recurring revenue. That number grew to $350M in 2023, which gave it a $12B valuation in May 2024. Two things can happen when that occurs: an IPO or an acquisition.
Have You Heard of Google?
Somebody leaked that Google became interested in acquiring Wiz for $23B, twice its current valuation. As a result, this would have been Google’s largest acquisition to date.
Wiz decided to walk away from the deal, citing antitrust and investor concerns (maybe also an opportunity to pounce on CrowdStrike’s weakness?), and chose to pursue an IPO instead. It may also be a negotiation strategy to increase Google’s offer.
Since its operations in 2020, Wiz has raised $1.9B from various venture capital funds and private investors (Bernard Arnault, Howard Schultz, Andreessen Horowitz, and other notable names).
Despite declining Google’s offer, the company partnered with Google Cloud to offer a robust and scalable security solution. Many believe Wiz has set new standards in the industry; watch out, Clowdstrike! This CloudStrike crash could decimate the company.
CrowdStrike Stock Competitors
For a few months now, AI has been the talk of the stock market. Many believe it’s the next big thing. However, many others claim it’s a bubble. On the other hand, there is also a buzz surrounding cybersecurity stocks, which have a connection with AI.
Hacking incidents and data breaches are at an all-time high, and there’s no reason to believe they will change. So, an incident like the CrowdStrike crash could impact the stock market.
Both parties are looking to implement AI into their business. Cybersecurity spending and the companies’ stock prices will likely increase.
1. Palo Alto Networks (NASDAQ: PANW)
We begin with Palo Alto, the largest cybersecurity company in terms of market cap (over $100B). They haven’t had a CrwodStrike crash incident. The company is known for its robust firewalls and innovative solutions that prevent successful cyberattacks. Various industries such as finance, healthcare, government, and manufacturing use their products.
Palo Alto also integrates AI into its products with Cortex, an AI-driven security operations platform that automates threat detection, investigation, and response.
In recent years, Palo Alto has engaged in strategic partnerships with major technology companies, including Google Cloud, to enhance the security of cloud environments.
Coincidentally, there have also been discussions between both parties for an acquisition. To conclude, Palo Alto has a strong business and financial performance. Its stock should perform well in the future.
2. Check Point Software Technologies (NASDAQ: CHKP)
We continue with Check Point, founded back in 1993. The company provides a range of products (network, endpoint, mobile, and cloud security) and services designed to protect against cyber threats.
Many of its clients are Fortune 500 companies, and it serves over 100,000 businesses. Like Palo Alto, Check Point has many partnerships with big tech companies, notably Google.
It seems that every company is implementing AI into its business. This makes me wonder, is AI a bubble? Check Point also focuses on integrating AI and machine learning into its products to enhance its ability to detect and respond to threats in real-time.
Despite only seeing revenue growth of 4% YoY, Check Point is currently trading at an all-time high. They would do well not to have an incident like the CrowdStrike crash.
3. Cloudflare (NYSE: NET)
Cloudflare provides robust security solutions that protect websites and applications from cyber threats, including DDoS attacks, data breaches, and other malicious activities.
The company has a strong market presence among Fortune 1000 companies, but many analysts believe that Cloudflare’s stock is trading at a substantial premium.
The company is not profitable yet. Hopefully, the CrowdStrike crash won’t affect their stock. For 2023, it posted an operating loss of $185.5M and a net loss of $183.9M. On the bright side, it does have over $250M in cash.
Unlike Palo Alto and Check Point, Cloudflare isn’t trading near its all-time high stock price. If the analysts are right, its price might drop further.
4. ETFs
If you don’t like to invest in individual cybersecurity stocks, maybe an ETF is more suitable for you. Thankfully, there are plenty of cybersecurity ETFs to choose from. Here is a short list of ETFs that could benefit from the CrowdStrike crash.
- First Trust Nasdaq Cybersecurity ETF (NASDAQ: CIBR) – 30 US-listed cybersecurity stocks.
- Amplify Cybersecurity ETF (NYSEARCA: HACK) – 24 hardware, software, and services companies related to cybersecurity.
- Global X Cybersecurity ETF (NASDAQ: BUG) – 26 large cybersecurity software companies.
- iShares Cybersecurity and Tech ETF (NYSEARCA: IHAK) – A mix of 40 tech and cybersecurity stocks managed by BlackRock.
- WisdomTree Cybersecurity Fund (NASDAQ: WCBR) – 25 stocks, but only a 2.85% price increase since its inception in January 2021.
- Vanguard Information Technology ETF (VGT) – Over 300 stocks in the tech industry, with some involved in cybersecurity.
Final Thoughts: CrowdStrike Stock
To conclude, CrowdStrike messed up. The company’s mistake may affect its business opportunities and reputation for the foreseeable future. Too many industries were affected, and the CloudStrike crash doesn’t look good for them. Thankfully, there are plenty of other cybersecurity companies out there that can do a better job than CrowdStrike.
Some are established, such as Palo Alto or Check Point. Others, such as Wiz, are relatively new to the game and are ready to revamp the industry. That is, as long as Google doesn’t acquire it. Regardless, the cybersecurity industry should grow in the upcoming years and decades, which makes it an excellent addition to your portfolio.
If you want to learn more about profiting from the stock market, head to our free library of educational courses. We have something for everyone, including trading options for those with small accounts.
Frequently Asked Questions
A coding update that went wrong caused the CloudStrike crash. It affected many businesses and industries globally.
Despite the outage, CrowdStrike remains a strong cybersecurity company. However, it must answer for its mistake (it caused more than $10B in financial damages) and repair the negative press surrounding it.
Palo Alto, Check Point, and Wiz are some of CrowdStrike’s biggest competitors. They may gain new customers and recurring revenue after what happened on July 19th.
