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. CrowdStrike
shares sank as much as 12% and at last check were trading near their intraday low of $249.05 Monday. CrowdStrike shares are up 90% 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, 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, Morgan Stanley said his checks indicate there are other next-generation competitors in the sector that are offering services at 15% to 20% lower prices, the Morgan Stanley analyst said. Fodderwala wrote he believed the “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,” Morgan Stanley 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 Inc.
which went public at the end of June. Morgan Stanley initiated an overweight rating on SentinelOne in late July.