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SentinelOne (S) Down 17% YTD: Should You Buy or Stay Away?
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SentinelOne’s (S - Free Report) shares have declined 16.9% in the year-to-date (YTD) period, underperforming the Zacks IT Services industry’s decline of 0.2% and the broader Zacks Computer & Technology sector’s 18% growth.
It has been suffering from a challenging macroeconomic condition and tighter financial conditions, which continue to impact customer buying behavior. High interest rate and persistent inflation continue to negatively impact enterprise spending. These factors, along with a revamp of SentinelOne’s go-to-market strategy, are expected to hurt Annualized Recurring Revenue (ARR) revenue growth in the near term.
Annualized Recurring Revenue grew 35% year over year to $762 million in the first quarter of fiscal 2024. The rate was lower than ARR growth of 39%, 42% and 47% reported in the fourth quarter of fiscal 2024, third-quarter fiscal 2024 and second-quarter fiscal 2024, respectively.
The challenging macroeconomic condition is expected to hurt go-to-market initiatives in fiscal 2025. SentinelOne has lowered its fiscal 2025 revenue guidance. It currently expects revenues between $808 million and $815 million, implying 31% year-over-year growth at mid-point as compared with previous guidance of $812-$818 million range.
YTD Performance
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $811.41 million, indicating year-over-year growth of 30.63%. The consensus mark for earnings is pegged at 3 cents per share, up by a penny over the past 60 days. SentinelOne had incurred a loss of 28 cents per share in fiscal 2024.
Innovative Portfolio & Strong Partner Base Aid Prospects
Although near-term prospects are risky, SentinelOne’s long-term growth trajectory remains intact, driven by an innovative portfolio and strong partner base that includes the likes of Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) and ServiceNow (NOW - Free Report) . These factors have been helping it to win customers.
Customers with more than $100,000 in ARR grew 30% year over year to 1,193 in the fiscal first quarter. ARR per customer increased in double digits year over year, driven by strong platform adoption and success with larger enterprises.
In the first quarter of fiscal 2025, revenues jumped 40% year over year to $186 million, driven by expansion in clientele. Singularity Data Lake was its fastest-growing solution (up triple-digits), followed by Cloud, Identity and others.
SentinelOne’s latest solution, Singularity Cloud Native Security, which is built on the company’s acquisition of PingSafe in February 2024, expanded its portfolio. It recently announced the availability of the solution in both the United States and Europe.
Singularity Cloud Native Security, which is an agentless cloud native application protection platform, has been rated as the best in the industry by real users as part of the 2024 G2 Summer Grid Reports.
Singularity Cloud Workload Security for Serverless Containers provides real-time, AI-powered protection for containerized workloads running on Amazon Web Service Fargate for Amazon ECS and Amazon EKS. The SentinelOne App seamlessly syncs threats into ServiceNow Incident Response for security operations and incident response.
The Singularity Platform is enhanced by Purple AI, SentinelOne’s advanced generative AI security analyst. Purple AI significantly accelerates threat hunting and investigations, reduces Mean Time to Response and provides comprehensive end-to-end enterprise security. This integration enables security teams to automate threat detection, triage and investigation processes using natural language translation, summarization and guided hunting capabilities.
Apart from access to SentinelOne’s threat intelligence source, Purple also has access to Google’s trusted and world-leading threat intelligence by Mandiant, which is available on the Singularity platform. It recently expanded collaboration with Google Cloud to enable stronger enterprise cyber defense.
SentinelOne’s innovative portfolio is winning accolades. It recently emerged as a frontrunner in the MITRE Engenuity’s ATT&CK Evaluations for Managed Security Services Providers.
Strong Liquidity Position
SentinelOne’s strong liquidity position is noteworthy. As of Apr 30, 2024, it had cash, cash equivalents and short-term investments of $1.1 billion and zero debt.
Free cash flow was $33.8 million in the fiscal first quarter.
What Should Investors Do Now?
SentinelOne’s strong portfolio, which leverages AI and a strong partner base, is a positive. Its Growth Score of A is hard to ignore for investors.
However, the Value Score of F suggests a stretched valuation at this moment.
The stock is trading at a premium with a forward 12-month P/S of 7.7X compared with the Zacks Computer and Technology sector’s 6.21X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
SentinelOne currently has a Zacks Rank #4 (Sell), suggesting that it may be wise to avoid the stock in the near term.
Image: Bigstock
SentinelOne (S) Down 17% YTD: Should You Buy or Stay Away?
SentinelOne’s (S - Free Report) shares have declined 16.9% in the year-to-date (YTD) period, underperforming the Zacks IT Services industry’s decline of 0.2% and the broader Zacks Computer & Technology sector’s 18% growth.
It has been suffering from a challenging macroeconomic condition and tighter financial conditions, which continue to impact customer buying behavior. High interest rate and persistent inflation continue to negatively impact enterprise spending. These factors, along with a revamp of SentinelOne’s go-to-market strategy, are expected to hurt Annualized Recurring Revenue (ARR) revenue growth in the near term.
Annualized Recurring Revenue grew 35% year over year to $762 million in the first quarter of fiscal 2024. The rate was lower than ARR growth of 39%, 42% and 47% reported in the fourth quarter of fiscal 2024, third-quarter fiscal 2024 and second-quarter fiscal 2024, respectively.
The challenging macroeconomic condition is expected to hurt go-to-market initiatives in fiscal 2025. SentinelOne has lowered its fiscal 2025 revenue guidance. It currently expects revenues between $808 million and $815 million, implying 31% year-over-year growth at mid-point as compared with previous guidance of $812-$818 million range.
YTD Performance
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $811.41 million, indicating year-over-year growth of 30.63%. The consensus mark for earnings is pegged at 3 cents per share, up by a penny over the past 60 days. SentinelOne had incurred a loss of 28 cents per share in fiscal 2024.
SentinelOne, Inc. Price and Consensus
SentinelOne, Inc. price-consensus-chart | SentinelOne, Inc. Quote
Innovative Portfolio & Strong Partner Base Aid Prospects
Although near-term prospects are risky, SentinelOne’s long-term growth trajectory remains intact, driven by an innovative portfolio and strong partner base that includes the likes of Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) and ServiceNow (NOW - Free Report) . These factors have been helping it to win customers.
Customers with more than $100,000 in ARR grew 30% year over year to 1,193 in the fiscal first quarter. ARR per customer increased in double digits year over year, driven by strong platform adoption and success with larger enterprises.
In the first quarter of fiscal 2025, revenues jumped 40% year over year to $186 million, driven by expansion in clientele. Singularity Data Lake was its fastest-growing solution (up triple-digits), followed by Cloud, Identity and others.
SentinelOne’s latest solution, Singularity Cloud Native Security, which is built on the company’s acquisition of PingSafe in February 2024, expanded its portfolio. It recently announced the availability of the solution in both the United States and Europe.
Singularity Cloud Native Security, which is an agentless cloud native application protection platform, has been rated as the best in the industry by real users as part of the 2024 G2 Summer Grid Reports.
Singularity Cloud Workload Security for Serverless Containers provides real-time, AI-powered protection for containerized workloads running on Amazon Web Service Fargate for Amazon ECS and Amazon EKS. The SentinelOne App seamlessly syncs threats into ServiceNow Incident Response for security operations and incident response.
The Singularity Platform is enhanced by Purple AI, SentinelOne’s advanced generative AI security analyst. Purple AI significantly accelerates threat hunting and investigations, reduces Mean Time to Response and provides comprehensive end-to-end enterprise security. This integration enables security teams to automate threat detection, triage and investigation processes using natural language translation, summarization and guided hunting capabilities.
Apart from access to SentinelOne’s threat intelligence source, Purple also has access to Google’s trusted and world-leading threat intelligence by Mandiant, which is available on the Singularity platform. It recently expanded collaboration with Google Cloud to enable stronger enterprise cyber defense.
SentinelOne’s innovative portfolio is winning accolades. It recently emerged as a frontrunner in the MITRE Engenuity’s ATT&CK Evaluations for Managed Security Services Providers.
Strong Liquidity Position
SentinelOne’s strong liquidity position is noteworthy. As of Apr 30, 2024, it had cash, cash equivalents and short-term investments of $1.1 billion and zero debt.
Free cash flow was $33.8 million in the fiscal first quarter.
What Should Investors Do Now?
SentinelOne’s strong portfolio, which leverages AI and a strong partner base, is a positive. Its Growth Score of A is hard to ignore for investors.
However, the Value Score of F suggests a stretched valuation at this moment.
The stock is trading at a premium with a forward 12-month P/S of 7.7X compared with the Zacks Computer and Technology sector’s 6.21X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
SentinelOne currently has a Zacks Rank #4 (Sell), suggesting that it may be wise to avoid the stock in the near term.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.