Cybersecurity agency SentinelOne (S 3.30%) has seen its inventory surge to date in 2024. The truth is, the share worth greater than doubled from a 52-week low of $12.43 final June to a excessive of $30.76 this previous Valentine’s Day.
SentinelOne’s share worth hit a excessive on Feb. 14 because of Financial institution of America upgrading the inventory from a impartial score to a purchase. With shares nonetheless hovering close to this excessive, it is truthful to wonder if it is now too late to purchase SentinelOne inventory.
To find out whether or not it nonetheless is sensible to take a position on this cybersecurity firm regardless of the elevated inventory worth, let’s look into SentinelOne in additional element. Now is an efficient time to take action, as a result of the corporate’s subsequent earnings name, masking its fiscal fourth quarter (ended Jan. 31), is scheduled for March 13.
SentinelOne faces business execs and cons
SentinelOne advantages from working within the cybersecurity business, an area the place safety from cybercriminals is important for organizations with any diploma of digital utilization, whether or not that is an internet site, e mail, buyer information, or monetary data.
This atmosphere is why the cybersecurity business is forecast to succeed in $183 billion in 2024, and develop to $274 billion by 2028. So demand for cybersecurity companies is strong, and that gives a multi-year income tailwind for SentinelOne.
Nevertheless it additionally creates a problem, as a result of working in an business with excessive buyer demand brings fierce competitors. In consequence, quite a few corporations devoted to cybersecurity exist, together with CrowdStrike and Palo Alto Networks. Add to that a number of companies that provide cybersecurity as a part of their digital options, similar to Microsoft, IBM, and Cisco Methods.
So in evaluating SentinelOne as an funding, a key issue is how effectively the corporate is capturing its share of a crowded cybersecurity market. One strategy to gauge that is by its progress in buyer depend, and on this regard, SentinelOne is doing effectively.
In its fiscal third quarter, ended Oct. 31, 2023, SentinelOne had over 11,500 shoppers. Distinction this with the 4,700 clients it had in 2021’s fiscal first quarter, the quarter earlier than the corporate’s IPO in June of that yr. In simply two-and-a-half years, SentinelOne achieved spectacular buyer progress of 145%.
SentinelOne’s monitor file of success
Together with buyer depend, it is also useful to take a look at SentinelOne’s annual recurring income (ARR) — or run price — generated from the corporate’s shoppers. It gives perception into SentinelOne’s capacity to not solely purchase new clients, but in addition to develop their spending on SentinelOne’s options.
In fiscal Q3, the ARR reached $663.9 million, a 43% bounce from the prior yr. This ARR progress manifested into SentinelOne’s Q3 gross sales of $164.2 million, a 42% year-over-year improve. And Q3 was the most recent in a multi-year streak of rising income since its 2021 IPO.
Information by YCharts.
This gross sales streak is about to proceed. SentinelOne expects fiscal This autumn income to return in at $169 million, a double-digit improve over the prior yr’s $126.1 million. The corporate’s buyer, ARR, and income progress present SentinelOne is efficiently capturing shoppers with its cybersecurity options.
The corporate’s platform has included synthetic intelligence since SentinelOne’s inception in 2013. Its AI-enabled answer can determine and proactively cope with cyberattacks with out the necessity for human intervention, making it quick and environment friendly.
These AI capabilities assist SentinelOne hold tempo with the instruments out there to cybercriminals given AI’s rise to prominence final yr with ChatGPT’s emergence. The truth is, SentinelOne uncovered cyberattack software program incorporating ChatGPT to carry out hacks utilizing AI.
Different issues with SentinelOne inventory
Regardless of the sturdy buyer and income progress, the corporate is just not worthwhile. SentinelOne exited fiscal Q3 with a internet lack of $70.3 million. Nevertheless, that is an enchancment over the prior yr’s internet lack of $98.9 million. SentinelOne has made some cost-cutting strikes because it strives to succeed in profitability subsequent yr.
Its fiscal Q3, the corporate’s stability sheet was excellent. Complete property have been $2.2 billion, far exceeding whole liabilities of $615 million. Money, money equivalents, and investments alone have been $1.1 billion.
Despite the fact that SentinelOne’s inventory has elevated dramatically over the previous yr, the corporate’s share worth remains to be beneath its IPO worth of $35. So it is not unreasonable for sturdy fiscal This autumn outcomes to doubtlessly push the inventory to better heights than its current 52-week excessive. The truth is, Financial institution of America set a worth goal of $35.
Given SentinelOne’s historical past of buyer and income progress, its bettering backside line, and robust stability sheet, SentinelOne inventory seems to be like a purchase.
Financial institution of America is an promoting accomplice of The Ascent, a Motley Idiot firm. Robert Izquierdo has positions in Financial institution of America, Cisco Methods, CrowdStrike, Worldwide Enterprise Machines, Microsoft, and SentinelOne. The Motley Idiot has positions in and recommends Financial institution of America, Cisco Methods, CrowdStrike, Microsoft, and Palo Alto Networks. The Motley Idiot recommends Worldwide Enterprise Machines and recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
