Earnings season continues to give investors a snapshot of a company’s performance. It’s also a time when well-run companies can continue a string of earnings beats. The real story, however, is the market reaction, not just to earnings, but to guidance.
Companies are getting more cautious in their outlook amid a pullback in government spending, and as inflation remains sticky. While many companies are still performing well, cautious guidance can still send shares reeling in the short term.
The latest company reporting great earnings and taking a divide? CrowdStrike Holdings (CRWD). The cybersecurity company beat earnings by nearly 20%, but lowered its earnings guidance in future quarters.
CrowdStrike has now seen its revenues jump by 29% over the past year, a strong sign of long-term growth. But shares are now up less than 10% over the past 12 months, and the stock is still expensively valued at 90 times forward earnings.
Action to take: CrowdStrike has been pulling back in recent weeks, and is back near a most-traded area in the $350 range. Shares may see some downside with any further market weakness in the months ahead, so interested investors should see if shares are capable of moving past the $350 range before buying.
For traders, the June $300 puts, last trading for about $12.10, could see mid-double-digit returns on any further downside in the coming weeks. Traders may want to take quick profits on any short-term drop lower in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.