CrowdStrike Shares Plummet 13% Following IT Outage Fallout

CrowdStrike shares plummet 13% following global cyber outage. Concerns over reputational damage, delays in new contracts, and legal battles. Rival SentinelOne sees shares surge 11% as potential beneficiary.

Credit: REUTERS

The incident, caused by a glitchy update to CrowdStrike's security software, resulted in widespread disruptions to internet services across various industries, including airlines, banking, and healthcare.

According to Microsoft, approximately 8.5 million Windows devices, less than 1% of all Windows machines, were affected by the outage. While analysts believe that CrowdStrike will eventually recover from the incident, there are lingering concerns about reputational damage, potential delays in new customer contracts, increased competition, and the possibility of legal battles.

Guggenheim analysts stated, "We don't believe it will materially affect renewals, at least not in the short term... However, we do think this will at least delay deal signings, if not cause some losses in closely contested deals." This suggests that while existing customers may not be significantly impacted, the incident could hinder the acquisition of new clients.

In contrast, rival cybersecurity firm SentinelOne experienced a surge in its shares, rising 11% on Monday. J.P. Morgan referred to SentinelOne as "the most obvious beneficiary" of what experts are calling the widest IT outage in modern history. This highlights the potential for market shifts and opportunities for competitors in the aftermath of such incidents.

Bernstein analyst Peter Weed warned that legal battles could ensue once CrowdStrike's customers have their systems up and running again. This raises questions about the responsibility and accountability of cybersecurity companies in preventing and mitigating such disruptions.

While services across industries gradually returned to normal, companies faced backlogs, delays, and even cancelled flights. This incident has prompted discussions on how to prevent similar situations in the future and whether critical software should be solely controlled by a few companies.

CrowdStrike's shares were trading at US$265.24 on Monday, following an 11% drop on Friday. At least six brokerages have lowered their price targets on CrowdStrike, and two have downgraded the stock's rating from "buy" to "neutral." J.P. Morgan analysts expressed concerns about the global impact of the event, stating, "The globally disruptive nature of this event will likely have an impact on CrowdStrike's financial and operational performance... Time spent on damage control is time spent on not selling."

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• CrowdStrike shares plummet 13% following global cyber outage

• Concerns over reputational damage, delays in new contracts, and legal battles

• Rival SentinelOne sees shares surge 11% as potential beneficiary

Source: REUTERS