CrowdStrike Holdings, Inc. (CRWD) saw its stock plummet 5.10% during intraday trading, as investors grapple with concerns over the company's high valuation and ongoing legal challenges. The cybersecurity firm's shares have been under pressure as it faces a combination of market skepticism and regulatory scrutiny.

At the heart of the selloff is CrowdStrike's premium valuation. The company is currently trading at a forward 12-month price-to-sales (P/S) ratio of 18.65X, significantly higher than the Zacks Security industry average of 12.53X. This lofty valuation has raised questions among investors about whether the stock's price can be justified, especially in light of increasing competitive pressures from rivals such as Palo Alto Networks, SentinelOne, and Cisco. These competitors offer similar cybersecurity products and may be poised to capitalize on any weakness in CrowdStrike's market position.

Adding to investor concerns are the legal challenges facing CrowdStrike. The company is reportedly under federal investigation by the U.S. Department of Justice and the Securities and Exchange Commission (SEC) over a $32 million deal with Carahsoft Technology to supply cybersecurity tools to the IRS. Allegations of potential financial irregularities, including pre-booking or channel stuffing, have surfaced, creating legal and reputational risks that are weighing heavily on investor sentiment. While CrowdStrike maintains it handled the transaction appropriately, the ongoing investigation has cast a shadow over the company's near-term prospects, contributing to the sharp decline in its stock price.