Retail Shrugs Off Palo Alto Downgrade But Goes Down Heavily On Crowdstrike

The top downgrades on Thursday included a financial technology stock and two cybersecurity firms. What’s interesting is how retail investors chose to treat the Street view differently in each case. Here’s a look at how investors on Stocktwits responded to the analyst actions:

1. PayPal Holdings Inc: William Blair reportedly downgraded PayPal to ‘Market Perform’ from ‘Outperform.’ Although the firm expects a potential upside to 2024 and 2025 earnings estimates, it does not see the stock's multiple rise significantly in the absence of accelerating payment volume growth or expanding transaction dollar margin. Retail investors, however, have shrugged off the downgrade, especially since there’s no explicit mention of a downward price target revision. The sentiment meter for the stock flipped into the bullish territory (55/100).

2. Palo Alto Networks Inc: Redburn Atlantic reportedly downgraded the cybersecurity stock to ‘Neutral’ from ‘Buy’ while reducing its price target to $325 from $350. Contrary to the consensus view, the firm’s analyst believes that a sharp re-acceleration in dollar growth for the firm from FY26 is unlikely. Regardless of the downgrade, retail investors are bullish (70/100) on the stock, considering it as a potential beneficiary of the decline in sentiment for Crowdstrike that found itself at the center of a massive outage across businesses around the world. Shares of the firm were up over 1% on Friday morning.

3. Crowdstrike Holdings Inc: Redburn Atlantic reportedly made a double downgrade on the cybersecurity firm’s stock to ‘Sell’ from ‘Buy’ and reduced the price target to $275 from $380 earlier. The downgrade comes on the back of a high valuation which Redburn analysts found “demanding." Any disappointment to sales or annual recurring revenue could lead to a sharp de-rating, the firm reportedly said. On Friday, an update by the firm caused a major outage across businesses around the world but CEO George Kurtz asserted the issue has been identified, isolated, and fixed. Shares were trading lower by over 9% on Friday morning. Retail sentiment fell into extremely bearish territory hitting a one-year low (4/100) supported by extremely high message volumes. Clearly the event has caused investors to question CrowdStrike’s longer-term outlook and leadership position in the space.