On Monday, Scotiabank reaffirmed its confidence in CrowdStrike Holdings (NASDAQ:), maintaining a Sector Outperform rating and a share price target of $400.00. The cybersecurity firm’s stock has experienced significant success, outperforming the NASDAQ 100 index by 20 percentage points year-to-date, following an impressive performance in 2023. Investor interest has spiked, questioning whether the company can maintain its upward trajectory.
Scotiabank highlighted several factors supporting the continued potential for CrowdStrike’s shares. The firm’s analysis suggests that CrowdStrike’s inclusion in the could lead to increased demand for its shares.
Moreover, a detailed assessment indicates that CrowdStrike’s financial targets for future annual recurring revenue (ARR) are attainable. Positive customer feedback on various products, including Cloud and Identity services, further bolsters the company’s outlook.
Despite the optimism, Scotiabank advises caution, noting that expectations for further multiple expansion should not be a primary reason for investment in CrowdStrike at this stage. The firm’s analysis includes a careful consideration of the company’s prospective inclusion in the S&P 500.
As the largest S&P Completion Index component, CrowdStrike is a prime candidate for promotion to the S&P 500, although the timing and likelihood of such an event are uncertain due to the company’s sector and competition from other candidates.
The potential for CrowdStrike’s inclusion in the S&P 500 could be tied to acquisitions of current S&P 500 companies, particularly in the technology sector, with expected deal completions in late 2024 or early 2025.
Such developments could act as a catalyst for CrowdStrike’s stock, potentially generating a demand for approximately 25 million shares, which is five times the average daily volume. Scotiabank’s analysis indicates that this scenario could provide a significant boost to CrowdStrike’s share value.
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