Shares of cyber security companies CrowdStrike holdings (CRWD -4.10%) they were falling today following yesterday’s Federal Reserve decision to raise the federal funds rate by an additional 75 basis points.
Tech stock was down 5.1% by 1:58 pm ET.
High-growth tech stocks are particularly vulnerable to the Fed’s decision as a rise in interest rates makes it more expensive for companies to borrow money.
Rising interest rates also caused Treasury yields to rise. When Treasury yields go up, a company’s future cash flows are worth less than they would have been if rates had stayed lower.
CrowdStrike investors are processing all of this today and are likely increasingly concerned that the Federal Reserve’s aggressive rate hikes may end up spurring a recession.
Despite these concerns, CrowdStrike’s results for its fiscal second quarter (ended July 31) have shown that the company has been financially resilient so far. CrowdStrike beat Wall Street’s consensus estimates for both the top and bottom line and even upped its lead for the full year, which is almost unheard of in most tech stocks right now.
The Fed’s recent interest rate hike overshadowed an analyst’s latest buy rating for CrowdStrike. Moffett analyst Nathanson Sterling Auty today initiated CrowdStrike hedging with a buy rating and price target of $ 280, a significant increase from the company’s current share price of $ 161.
But investors appear to be focused on recession concerns right now. The Federal Reserve said it plans to continue raising rates in 2023, which has left CrowdStrike investors – and the market in general – worried that the Fed may end up plunging the US economy into a recession.
Chris Neiger has no position in any of the titles mentioned. The Motley Fool has positions and recommends CrowdStrike Holdings, Inc. The Motley Fool has a disclosure policy.