Should You Buy CrowdStrike Before Nov. 26? Here's What History Says.

CrowdStrike (NASDAQ: CRWD) experienced the worst of times this year. A faulty software update launched by the cybersecurity giant back in July set off the world's biggest-ever information technology outage -- and the stock crashed more than 20% over two trading sessions. CrowdStrike immediately took action, issuing a fix to the problem in about an hour, and in the weeks that followed put into place measures to prevent a similar event from happening again.

As a result, customers and investors seem to have maintained their faith in the company. The stock has climbed 50% since its low point in August and is heading for a 30% gain this year. And in the earnings report that followed the outage, CrowdStrike said most customers remained on board and the company even had signed some big new contracts.

That's great news, but it's important to keep in mind that the effects of the outage may not be completely over. CrowdStrike is offering compensation to customers, and it's predicted this will weigh on earnings in the coming quarter. We'll get a close-up view of this and other details on Nov. 26 when CrowdStrike reports fiscal 2025 third-quarter earnings. Should you buy CrowdStrike before this key date? Let's consider what history says...

Image source: Getty Images.

CrowdStrike's Falcon platform

So, let's talk about how CrowdStrike has become such an industry giant in the first place. The simple fact that the July outage forced so many key operations to a halt -- from flights to surgeries -- showed just how deeply implanted this company's cybersecurity system is around the world. CrowdStrike offers customers one lightweight agent known as Falcon -- powered by artificial intelligence (AI) -- that integrates data from the customer and beyond to predict threats.

Customers may choose among 28 modules to tailor the security system to their needs and each of these modules seamlessly attaches to Falcon. This makes Falcon a great option for customers of all sizes and allows them the flexibility to increase or decrease services.

All of this has helped CrowdStrike's earnings to soar in recent times, beating analysts' estimates over at least the past four quarters -- including the quarter following the outage. In fact, in that quarter impacted by the outage, CrowdStrike showed its resilience. The outage happened in the last two weeks of the reporting period, when most deals typically close -- but this time, those deals were pushed along to the next quarter.

Still, CrowdStrike managed to report a 32% increase in total revenue to more than $963 million, and annual recurring revenue (ARR) also climbed 32% to $3.86 billion -- and more than $200 million of ARR was newly added in the quarter. On top of this, the company maintained most of the deals in the pipeline and added new ones. So, even after a major challenge during the quarter, CrowdStrike went on to excel, offering us reason to be optimistic about the company's future.

A look at history

But should we specifically buy CrowdStrike before the next earnings report? A look at history shows us the company's share price has advanced in the month following its earnings reports over the past five consecutive quarters. After the recent second-quarter report, it rose more than 8% in the following month-long period, and after the first-quarter report, the stock jumped 26%. In the three quarters that preceded that -- the fourth, third, and second of the 2024 fiscal year -- it advanced 6%, 20%, and 12%, respectively, in the month to follow.

So, history shows us that, in recent times, CrowdStrike has gained following its earnings reports. And the company's latest earnings report -- after a major crisis -- wasn't an exception.

It's important to note, however, that, as mentioned above, the impact of the crisis isn't over. The compensation offered to customers -- customer commitment packages -- will impact revenue in the third quarter by about $30 million, CrowdStrike predicted. The company forecasted quarterly revenue in the range of $979.2 million to $984.7 million, and that includes the commitment package impact. Investors will be looking at performance here, and any miss could weigh on the stock.

Now, let's return to our question. Should you buy CrowdStrike before the Nov. 26 earnings report? If you do, and if CrowdStrike follows its historical trend, you could score a short-term win. But what's even better is scoring a long-term win, and the great news here is to do that, you don't have to time the market and buy a stock on a particular day. If you hold onto CrowdStrike stock for a number of years, performance over a few weeks won't change your overall returns by much at all.

I like CrowdStrike for its solid earnings track record, its resilience after a major challenge, and its long-term prospects -- and that makes it a great stock to pick up today or after Nov. 26.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy.