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Earnings Results: Crowdstrike beats on earnings and raises forecast, but it isn’t helping the stock

CrowdStrike Holdings Inc. executives reported earnings, sales and a forecast that beat expectations Thursday and increased their annual guidance, but shares still declined in after-hours trading.

CrowdStrike CRWD, +7.79% reported a fiscal first-quarter loss of $31.5 million, or 14 cents a share, on sales of $487.8 million, up from $303 million in the same quarter a year ago. After adjusting for stock-based compensation and amortization, the security-software company reported earnings of 31 cents a share, up from 10 cents a share a year earlier. Analysts on average expected adjusted earnings of 23 cents a share on sales of $464 million, according to FactSet.

For the second quarter, CrowdStrike executives guided for adjusted earnings of 27 cents to 28 cents a share on sales of $512.7 million to $516.8 million, topping analysts’ expectations. On average, analysts were predicting adjusted earnings of 24 cents a share on sales of $510 million, according to FactSet.

Executives also increased their yearly forecast, which now calls for adjusted earnings of $1.18 to $1.22 a share on sales of $2.19 billion to $2.21 billion. They had previously forecast earnings of $1.03 to $1.13 a share on sales of $2.13 billion to $2.16 billion.

CrowdStrike shares declined in after-hours trading following the release of the report, after closing with a 7.8% gain at $174.02.

Young software companies have been some of the hardest hit in a sharp downturn for tech stocks in the first half of 2022. CrowdStrike, which went public three years ago, largely avoided the selloff until the spring, with shares falling 12.5% in April and 19.5% in May, but they have bounced back recently, increasing 12.2% last week and more than 4% so far this week.

Software stocks have rebounded after strong reports from Salesforce Inc. CRM, +7.00%, UiPath Inc. PATH, +16.70% and others this week. While many analysts have reduced price targets on software stocks after the downturn, they still appear optimistic about their prospects, especially for security software and others that are in demand from companies looking to modernize and protect their businesses.

Mizuho Securities analysts reduced their price targets on several software stocks last month to “reflect a greater degree of macro uncertainty,” but immediately noted “our recent checks indicate that overall software demand has remained good overall, and particularly digital transformation and/or security projects.”

CrowdStrike’s price target was reduced to $220 from $270, but the analysts wrote that “CRWD data points continue to indicate significant legacy displacement activity and installed base expansion.”

“We expect another healthy revenue-upside quarter, although the model setup for F1Q leads us to believe the ARR upside this quarter may be more modest than usual,” they wrote.

ARR, or annual recurring revenue, came in at $1.92 billion after CrowdStrike added $190.5 million in net new recurring revenue in the quarter. Analysts on average were expecting $1.89 billion in ARR.

CrowdStrike stock has declined 15% so far this year, as the S&P 500 index SPX, +1.84% has declined 14%.

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