CrowdStrike stock forecast ahead of earnings: will it rebound or crash?

CrowdStrike shares have retreated over the past few weeks, sliding from their year-to-date high of $227.25 to $190.68. Even with this pullback, the stock remains well above its year-to-date low of $85.65. 

Attention now turns to the company's upcoming earnings report, which should offer more clarity on how the business is performing.

CrowdStrike to publish its earnings report as analysts remain optimistic

CRWD stock has done well this year as investors adjusted to the view that artificial intelligence will lead to more cyber-related risks. These fears escalated after Anthropic and OpenAI revealed that their models had accidentally hacked some companies.

These hacks pushed analysts to revise their cybersecurity stocks upwards. Joseph Gallo, a Jefferies analyst, hiked the target from $190 to $230, much higher than the current $190. Eric Heath, a KeyCorp analyst, hiked his target from $234 to $240, while JPMorgan and Mizuho boosted their targets to $235 and $240, respectively. 

Focus now shifts to the upcoming earnings report, which will provide more insights into its revenue and profitability growth. The most recent results showed that CrowdStrike ended the quarter with an ARR of $5.5 billion, up by 24% YoY, with the net new ARR rising to $256 million.

Total revenues jumped by 26% in the quarter to $1.39 billion as more companies entered the ecosystem. This growth coincided with a steady increase in its gross margin, which moved to 78%.

READ MORE: CrowdStrike stock is nearing its ATH: Top 3 reasons it may reverse soon

Yahoo Finance data shows that analysts expect the results to show that its revenue jumped by 23% to $1.4 billion. For the third quarter, analysts see the revenue coming in at $1.51 billion, up by 22.60% YoY.

The annual revenues are expected to jump to $5.94 billion, followed by $7.23 billion next year. Similarly, the earnings-per-share (EPS) is expected to jump from $0.23 last year to $1.23 next year. 

Still, the main challenge facing CrowdStrike is its substantial valuation. Its forward price-to-earnings ratio has moved to 155, much higher than other companies. For example, Micron has a forward multiple of 14, while Nvidia has a multiple of 22. As a result, the management will need to publish strong earnings and guidance to justify the valuation.

CrowdStrike stock technical analysis

CRWD stock chart | Source: TradingView

The daily chart shows that the CRWD stock has slumped in the past few weeks, moving from the year-to-date high of $227.25 to the current $190. Its lowest level this week aligned with the lower side of the ascending channel that connects the key swings since June 9 this year.

The stock has now moved below the 50-day Exponential Moving Average (EMA) and is in the process of forming a bearish pennant pattern. A break below the lower side of the channel will confirm the bearish breakout, potentially to the key support level of $174.64, its lowest level in July. 

The alternative scenario is where the stock rebounds, potentially to the upper side of the channel at $227.