Morgan Stanley initiated coverage today of CrowdStrike at underweight (aka Sell), due to “growing signs of increased competitive and pricing pressure likely making share gains more difficult”, and that “CrowdStrike’s early leadership position is now increasingly challenged by more competitive next-gen EDR alternatives that are narrowing the functionality gap and offering price points typically at least 15-20%+ less expensive.”
Aka they are valued too high, and competition is coming for them by undercutting pricing in deals. Nothing new here – this has been the case since CRWD’s IPO, in fact.
WHAT THEY DON’T SAY
Morgan Stanley was one of the lead underwriters of the Sentinel One IPO in June.
In July, those underwriters exercised their right to buy 5.25M shares from the IPO. https://www.sentinelone.com/press/sentinelone-announces-unde…
In tandem with all that, Morgan Stanley initiated overweight (aka Buy) on Sentinel One.
So they don’t seem to mind the way tinier upstart (that they own) being valued as one of the top most expensive stocks in the SaaS (way above CrowdStrike) in this same highly competitive market.
BTIG earlier this month downgraded to Neutral on fears of Sentinel One rising as competition.
Mizuho today however, said the opposite on CrowdStrike, and maintained their Buy rating with target raise from $315 to $360.
Luckily, we now have Sentinel One as a public company, and can easily trace how they are doing. They seem to be capturing smaller customers, as CrowdStrike is growing ARR way more for its cust growth rate. Last Q, CRWD added +1660 costs, S added +600 custs. CRWD added $150.56M net new ARR, S added $36.68M net new ARR.
As Saul mentioned in the past, Sentinel One is operationally disappointing: https://boards.fool.com/sentinel-one-8211-a-thought-experime…
… who normally doesn’t give a crap about sell-side ratings, but wanted to note how the company in today’s downgrade has direct business with and shares in the main competition