Alphabet Cuts Stake in CrowdStrike and DexCom: Implications Ahead

Recent reports indicate Alphabet has significantly reduced its stakes in CrowdStrike and DexCom over concerns of high valuations and market challenges. Investors should assess the potential impacts on stock prices as institutional selling activity draws attention.

Date: 17-09-2024

AI Rating: 5

The latest report highlights Alphabet's recent trading behaviors regarding two significant investments: CrowdStrike and DexCom. Both companies have seen their stakes diminished due to valuation concerns and market performance issues.

CrowdStrike Holdings Analysis

Alphabet has drastically cut its stake in CrowdStrike by 50% in the June-ended quarter, following a 33% reduction earlier. Reports indicate this may have been influenced by its high price-to-sales (P/S) and forward price-to-earnings (P/E) ratios, which were considered excessive. In addition, a recent operational mishap involving a downtime incident with its Falcon security platform could temporarily impact revenue. Still, CrowdStrike's dominance in the cybersecurity field positions it well for ongoing revenue generation, leading to potential rebounds.

DexCom Analysis

Similarly, Alphabet has reduced its DexCom investment by over 51% in the first quarter and an additional 42.1% in the second. The decline was attributed to valuation metrics, compounded by significant concerns post its earnings miss which saw the company reduce full-year sales guidance and face challenges in customer acquisition. The advent of GLP-1 therapies could further impact DexCom sales. While DexCom stands to benefit from an increasing number of diabetes diagnoses, the immediate financial outlook raises questions.

Potential Impact on Stock Prices

Investors should remain vigilant as these divestitures and concerns around both companies could lead to negative stock performance. In the case of CrowdStrike, while operational challenges might dampen investor sentiment, its long-term prospects remain solid. For DexCom, the potential fallout from guidance cuts and changing market dynamics warrants close analysis.

Stocks: NASDAQ:GOOGL NASDAQ:CRWD NASDAQ:DXCM