CrowdStrike (CRWD) experienced a notable decline in its stock value on Friday, closing the trading session with a 6.8% decrease. This downturn occurred amid a broader market retreat, with the S&P 500 index falling by 1.8% and the Nasdaq Composite index dropping by 2.2%.
The decline in CrowdStrike’s valuation was linked to several indicators that heightened concerns about the U.S. economy’s condition. The company also faced a negative impact following a Bloomberg report that revealed the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) were investigating its business arrangement with Carahsoft.
Shifts in macroeconomic expectations exerted downward pressure on CrowdStrike’s stock. Growth stocks were significantly affected by new bearish macroeconomic data. Existing home sales for January decreased to 4.08 million units, and the University of Michigan’s Consumer Sentiment index score fell to 64.7%, reflecting a 10% sequential drop. This decline in consumer sentiment was primarily caused by worries over inflation and tariffs.
Additionally, S&P Global released data that further alarmed investors. Their manufacturing Purchasing Managers’ Index (PMI) for February was reported at 51.6, indicating modest growth but falling short of the 52.8 forecast by economists. Furthermore, S&P’s services PMI unexpectedly dropped to 49.7, significantly below the expected score of 52.8. This macroeconomic news triggered a sell-off in equities, causing substantial pullbacks for CrowdStrike and other growth stocks.
In addition to macroeconomic pressures, CrowdStrike’s stock was adversely affected by news of the Carahsoft investigation. The DOJ and SEC are examining the company’s $32 million agreement through Carahsoft to deliver cybersecurity services to the Internal Revenue Service (IRS). Although CrowdStrike reportedly does not anticipate the renewal of this deal, investors are concerned about potential risks that the investigations might negatively impact previously booked or anticipated sales.
