This quarter might be the most important earnings season for the United States stock market this year; all of 2024 has been a smooth ride quarter after quarter until this brought some concerns upon the technology sector. Particularly issues surrounding the semiconductor industry and artificial intelligence, where the vertical of cybersecurity gets pulled in by default and association. This is where the share of CrowdStrike Holdings Inc. (NASDAQ: CRWD) might come into play.

After a systems shutdown issue over the past two quarters, CrowdStrike stock sold off suddenly and recovered just as fast when investors and broader markets discovered no material changes to the company’s earning capacity after the incident. However, it is not out of the woods yet, as everything having to do with technology today is against the ropes of one sort of conflict or another.

Now that CrowdStrike is about to report its quarterly earnings in a few days, investors might be wondering what the implications may be moving forward. While betting on an earnings direction might be speculative at best, there are ways to gauge what the market is thinking, or at least expecting, of a given stock in the coming quarters, so here’s the view for CrowdStrike.

CrowdStrike Stock Poised for a Breakout: Market Signals Suggest a New All-Time High

Two metrics and factors typically drive a stock price, whether it is higher or lower. The first one, and most commonly watched and understood, is a company's earnings per share (EPS), which might be more logical than anything else for investors.

However, the second factor is abstract, concerning how markets perceive these earnings, especially the forward EPS projections. To start measuring this perception, investors can look at a stock’s forward P/E ratio in comparison to peers to understand how much markets are willing to pay for future growth and why.

When it comes to CrowdStrike stock, investors can see that Wall Street analysts now expect to see up to 17.3% in EPS growth for the next 12 months. Compared to the internet software sector’s average EPS growth rate of 13.5%, CrowdStrike stock starts to stand out from its peers in the software sector.

Now that investors know what CrowdStrike might bring in as EPS for next year, it is time to gauge how the market feels about this projection today. By trading at a forward P/E ratio of 83.5x, the stock commands a massive premium above the sector’s average valuation of 49.4x today.

Some investors would call this expensive, while others understand that the stock market is perfectly willing to overpay for a stock expected to deliver above-average growth rates. In this case, CrowdStrike does fit the description. However bullish this may be, it is only half the equation to figuring out the future path.

The other half concerns what other market participants, such as institutions and Wall Street analysts, may think of CrowdStrike stock in the future.

Market Forces Align for CrowdStrike: A New Stock Rally on the Horizon

What Wall Street and other participants have to say aligns with the fact that the broader markets are willing to overpay for CrowdStrike stock today, starting with the bearish side of the market, who should be the first to step up to the plate if they really believed the stock could come down.

That’s not the case, however, as CrowdStrike stock’s short interest declined by as much as 10% over the past month alone, a direct sign of bearish capitulation in the middle of what is turning out to be undeniable evidence that the company has double-digit upside ahead of it in the coming quarters.

To reiterate the momentum being added by the short sellers covering their positions, analysts on Wall Street came to give their opinions on the stock as well. Especially those at JMP Securities, who recently reiterated their “Market Outperform” rating on the stock, this time coupling their views with a $400 price target on the company.

These valuations now call for a net upside of up to 12% from where the stock trades today, not to mention a new all-time high to shake off most – if not all – allegations against the technology sector and its verticals involved. The cherry on top for investors catching onto this trend is the institutional buying on top of it all.

Those at State Street decided to boost their holdings in CrowdStrike stock by as much as 2.9% as of November 2024, bringing their net investment up to $2.7 billion today, or 3.9% ownership in the company.

All told, investors could probably guess that the implications of CrowdStrike’s earnings are positive and bullish.