CrowdStrike vs. SentinelOne: Which Stock to Choose?

Organizations around the world are increasingly sharing their documents in different places, thanks to the adoption of the cloud, rising mobility of the workforce, and an increasing number of connected devices. However, this has also led to organizations becoming more vulnerable to cyber-attacks.

This is why companies that provide cloud cybersecurity solutions are becoming more important.

Using the TipRanks stock comparison tool, let us compare two such cloud cybersecurity companies, CrowdStrike Holdings and SentinelOne, and see what Wall Street analysts are saying about these stocks.

CrowdStrike Holdings (NASDAQ: CRWD)

CrowdStrike Holdings, the cloud cybersecurity company founded in 2011, continued its growth momentum in Q3 FY22. The company’s revenues soared 63% year-over-year to $380.1 million, surpassing analysts’ expectations of $363.48 million.

The company earns revenues primarily through the sale of subscriptions to its Falcon platform and other cloud modules.

Adjusted earnings came in at $0.17 per diluted share, more than doubling from earnings reported in the same period last year and topping the consensus estimate of $0.10 per share.

George Kurtz, CrowdStrike’s Co-Founder and CEO commented, “CrowdStrike delivered a  robust third quarter with broad-based strength across multiple areas of the business leading  to net new ARR [annual recurring revenue] growth accelerating and ending ARR growing 67% year-over-year to surpass the $1.5 billion milestone.”

The company’s key product is the Falcon platform, which comprises two integrated proprietary technologies: “an intelligent lightweight agent” that can be deployed easily, and its “cloud-based, dynamic graph database called Threat Graph.”

CRWD is expanding its product portfolio and in October this year introduced Falcon FileVantage, a file integrity monitoring solution for the data security market that monitors critical files and systems.

Berenberg Bank analyst Kingsley Crane believes this module is set “to aid legacy conversions in cases where FIM [file integrity monitoring] capabilities had been a requirement.”

Moreover, the analyst also approves of the company’s acquisition of SecureCircle, a SaaS- (software-as-a-service) based cybersecurity service that is adding more capabilities to improve data security.

Crane added, “SecureCircle is primarily a data loss prevention (DLP) tool today, which is a $3bn market. Looking across CRWD’s total platform, we see unique opportunities to monetize that could expand that TAM [total addressable market].”

The analyst is of the opinion that the adoption of Zero Trust security strategies, which is a move of network security towards a more comprehensive model, will result in CrowdStrike grabbing more market share in the Endpoint Security market.

What’s more, Crane believes that “a significant opportunity exists for CrowdStrike to continue to take share from incumbent legacy vendors and Microsoft.”

The analyst also mentioned in his research report that considering that legacy endpoint solutions cannot be used to secure workloads in the cloud, CRWD is “well positioned to  cross-sell these products [cloud security and legacy endpoint solutions] to endpoint customers.”

Crane pointed out that with only 24% of customers adopting six or more non-endpoint and cloud modules as in the fourth quarter of this calendar year, “we believe there is a significant opportunity for CrowdStrike to grow revenue and margins as customers continue to expand their module adoption.”

Considering this upbeat outlook, Crane remains bullish, with a Buy rating and a price target of $265 (33.4% upside) on the stock.

Other analysts are also bullish about CrowdStrike, with a Strong Buy consensus rating based on 14 Buys, 2 Holds, and 1 Sell. The average CrowdStrike price target of $287.06 implies 44.5% upside potential to current levels.

SentinelOne (NYSE:S)

Even after delivering solid fiscal third-quarter results, SentinelOne saw its shares falling 7.6% in the past five days, as the lockup period post its IPO on around 200 million shares expired on December 9.

SentinelOne had a strong Q3, wherein its revenues soared 128% year-over-year to $56 million. The company earns a majority of its revenues through the sale of subscriptions to its Singularity Platform where its subscription tiers include Singularity Core, Singularity Control, and Singularity Complete.

What’s more, the company’s Annualized Recurring Revenue (ARR) also increased.

Dave Bernhardt, CFO of SentinelOne, commented, “Our ARR growth accelerated to 131% year-over-year as we delivered ARR of $237 million. The strength was broad based, including new and existing customers as well as large and mid-sized enterprises.”

Moreover, SentinelOne’s adjusted gross margin improved to 67% in Q3 from 58% in the same period a year back.

Cowen analyst Shaul Eyal expects this gross margin to expand in the range of 70% over the long term, as he anticipates that the company’s data center hosting costs will be lowered. It is as a result of the company’s $155 million acquisition of Scalyr, a cloud-based data analytics platform, that “duplicative storage and processing costs” will be reduced.

The analyst was also positive about the other key metrics for the stock, including its expanding ARR and rising number of customers.

SentinelOne’s total customer count increased 75% year-over-year to more than 6,000 customers as of October 31.

Moreover, the analyst was upbeat about the emerging product trends, as the company’s management “indicated that 10% of new business has been generated from a combination of IoT [Internet of Things], data, and cloud modules.”

Lastly, Eyal, while acknowledging the rising competition from endpoint protection (EPP) vendors like CrowdStrike, also mentioned some key points in favor of SentinelOne.

The analyst pointed out that the company was a leader in the EPP (Endpoint Protection Platform) market and was at an advantage as a result of the rising momentum of its cloud security portfolio, new product innovations, and the trend of increasing digital transformation as a result of remote or hybrid work model.

As a result, Eyal is bullish, with a Buy rating and a price target of $77 (63.3% upside) on the stock.

Other analysts echo Eyal with a Strong Buy consensus rating on SentinelOne, based on 10 Buys and 2 Holds. The average SentinelOne price target of $67.75 implies 43.6% upside potential to current levels.

Bottom Line

While analysts are bullish about both stocks, it remains to be seen who will win this EPP race. However, based on the upside potential over the next 12 months, CrowdStrike seems to be a better pick.

Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.