CrowdStrike outlook appears 'absolutely solid' despite outage

Cybersecurity stocks are in focus this week, with SentinelOne (S) and CrowdStrike (CRWD) earnings giving investors a fresh read on the sector. TD Cowen senior analyst Shaul Eyal joins Market Domination to discuss the state of the cybersecurity industry and some of its key players.

All eyes will be on CrowdStrike's earnings on Wednesday, as it will be the first report since a software defect caused a global outage in July. Eyal expects "just a little bit of a haircut" when it comes to the company's guidance for the second half of the year. "I think that might, at the end of the day, show that the outage that we had seen back on July 19 was a major bump, but still a bump. And I think the long-term outlook for the company remains absolutely solid."

On the other hand, Eyal is more cautious about Okta (OKTA) and maintains a Hold rating on the stock. Despite having two outages over the last 18 months, he believes that management could turn the company around. With more consistency, Eyal believes that Okta could eventually gain a Buy rating.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video Transcript

Cyber security socks are in focus.

This week was sent on one set to report a second quarter earnings after the belt today.

And tomorrow Wednesday, crowdstrike will release its first earnings report after a software defect led to a global outage back in July just a few minutes until the closing bell.

We're looking at how to navigate cybersecurity software stocks, the Yahoo finance playbook joining us.

Now we have Shaul Y'all, he's a T DC, a senior analyst.

It's great to have you, Shaul.

Thanks so much for taking the time to join us.

Let's start with crowds, right?

Because the big focus is going to be on that global outage.

What do you think the fallout is going to look like within this report?

I think what we are expecting tomorrow is pretty much maybe just a little bit of a haircut in terms of the guidance into the second half of this year.

Uh We, we also have an analyst say coming in the middle part of September, I would imagine at that point, the company might be in a position to provide us with a longer term outlook.

Um I think that might at the end of the day show that uh the outage that we have seen back in July 19 was a major bump but still bump.

And I think the long term output for the company remains uh absolutely solid.

So this is the way we would look at it.

Uh a little bit of an uncertainty in the near term, but the long term outlook remains absolutely intact.

Cheryl has, has crowd strikes, pain, but another company's gain has have names in your coverage universe been able to capitalize on their misstep.

So, um as you mentioned, Sentinel one will be reporting results uh in about 10 minutes or less.

Um We would imagine that they have been trying to take advantage of going into some accounts and displace crowd strike.

Uh given the, the the outage that we have seen uh aside from that um companies such as uh Z Scaler, uh Palo Alto uh fed it in check point, I would imagine in some form of shapes have been trying to capitalize, maybe gain some potential uh share and accounts in the near term on the expense of crowds, the various verticals that they play in.

So how much of that is more so they're taking the newer, maybe what would have been new customers from crowdstrike away versus the existing customers.

Do you expect to see any material weakness or, I guess hesitation amongst those existing customers of crowdstrike as a result of what happened over the summer, imagine existing customers.

Um you know, some of them could be taking a call but, but, but I'll say there's no, no, see.

So uh no chief information security officer, despite the outage and I'm not downplaying it.

Uh No one is going to get fired for uh owning and investing in crowd strike.

Uh indeed a mishap, but nevertheless, one that uh has been overcome will be overcome.

Um And I think in, in that respect, probably um new logos versus existing customers.

Um maybe a little bit of uh of a softness in terms of the new logos.

But I would imagine that kind of a longer term.

We might be sitting here a year from now and then looking back at it, we may be a little bit of a green on our, on, on, on our face, we call the solar winds um hack uh back in late 2022.

Uh It's ancient history right now.

Sure.

Yeah.

So you like cr track, I looked through your cover here, you have a number of buys one thing.

You're, you're not a as hot on.

She will be a we have a hold ho how come, why, why neutral on Octa and what would you need to see to get more bullish?

Absolutely.

So, in Octus case, and also we'll be reporting results um tomorrow after the close in Octus case, um We have been seeing Cyber Arc as becoming one of the leading platform providers in all things, identity.

Um in Octa case, given um two outages over the course of the past 18 months, we have become psyche more neutral, but we'll say that some of the actions taken by management over the course of the past few quarters actually are beginning to bear fruit.

So maybe psyche more, slightly more consistency, uh we can become much more constructive with our views.

And some of the uh some of the steps that they have taken, they announced that restructuring plan, the reorganization of uh of their sales team here in, in North America in terms of additional cost cutting efforts.

Is that something that you're looking for?

Is it more so how long maybe some of these, some of these moves that they have already taken, how long it's going to take in order to, to significantly impact their bottom line?

I think from, from a head conduction that that play is, is already done.

Uh I think what is likely to come is that expansion of their existing platform into new logos as well as existing customers?

So I think we are looking probably slightly more into the top line than uh into the operational expenses front this time around