In this piece, I evaluated two cybersecurity stocks, SentinelOne (NYSE:S) and CrowdStrike Holdings (NASDAQ:CRWD), using TipRanks’ comparison tool to see which is better. A closer look suggests a bearish view for SentinelOne and a neutral view for CrowdStrike.
SentinelOne operates an autonomous cybersecurity platform that utilizes artificial intelligence (AI) to prevent, detect, and respond to potential threats. Meanwhile, CrowdStrike Holdings offers cloud-based security that supports next-generation cyber protection through cloud modules on its Falcon platform.
Although SentinelOne stock has fallen 3% year-to-date, shares have gained 84% over the last year. On the other hand, shares of CrowdStrike Holdings are already up 17.6% year-to-date and have gained 195% in the past year.
With such a dramatic difference in their year-to-date performances, the huge gap between their valuations is no surprise. Neither company is profitable, so we’ll compare their price-to-sales (P/S) ratios to gauge their valuations against each other and that of their industry. For comparison, the American software industry is trading at a P/S of about 10.3, in line with its three-year average.
SentinelOne (NYSE:S)
At a P/S of 12.95, SentinelOne is trading slightly higher than its industry and at a steep discount to CrowdStrike. However, while increased interest in endpoint security makes this stock look interesting, significant profit-taking by insiders suggests there may be no more upside left in the near term. Thus, a bearish view seems appropriate.
SentinelOne shares gained 5.8% on Monday following an upgrade from BTIG analysts, who noted the company’s strength, specifically in endpoint security. It seems clear that more and more businesses are becoming concerned about endpoint security and seeing the need to protect an increasing number of mobile devices and laptops, which certainly bodes well for SentinelOne in the long term.
However, in the near term, insiders have been taking significant profits in the company’s stock, amounting to $160.6 million in Informative Sell transactions over the last three months. That total doesn’t even include the growing number of Auto Sell transactions we’ve been seeing as SentinelOne shares have climbed.
Insiders typically establish preset trading plans with prices at which they will automatically sell their company’s stock. As a result, all those Auto Sells may be the result of the stock repeatedly pinging those prices, suggesting that insiders don’t see much more upside for the stock in the near term.
Finally, while SentinelOne is demonstrating steady improvement in earnings as its losses per share dwindle, it isn’t expected to be profitable for a few more years. Thus, I’d like to see a significantly lower valuation before considering a more constructive view.
What is the Price Target for S Stock?
SentinelOne has a Moderate Buy consensus rating based on 14 Buys, 13 Holds, and zero Sell ratings assigned over the last three months. At $27.41, the average SentinelOne stock price target implies upside potential of 6%.
CrowdStrike Holdings (NASDAQ:CRWD)
At a P/S of 24.5, CrowdStrike is trading at a sizable premium to its industry and to SentinelOne. However, while there are signs that such a premium might be warranted, CrowdStrike has entered overbought territory, and insiders have begun taking significant profits. This suggests that a neutral view may be appropriate, pending a better entry price.
Like with SentinelOne, there’s also been significant profit-taking by insiders in CrowdStrike. Insiders have unloaded $59.3 million worth of shares in Informative Sell transactions over the last three months. In fact, there has also been meaningful Auto Sell activity in CrowdStrike over the last couple of months, further suggesting that insiders see little opportunity for further upside in the near term.
On the other hand, there is much to like about CrowdStrike, which makes this one stock that could be worth monitoring carefully for a more attractive entry price. The company looks on track to become profitable this year, and its stock has put up some impressive long-term gains, rising 373% since its June 2019 initial public offering.
Finally, with a Relative Strength Index of 76.1, CrowdStrike is in overbought territory, as an RSI of over 70 generally suggests a stock could be due for a correction. Thus, it seems prudent at this point to wait for a correction and buy some shares then.
What is the Price Target for CRWD Stock?
CrowdStrike Holdings has a Strong Buy consensus rating based on 37 Buys, two Holds, and zero Sell ratings assigned over the last three months. At $293.22, the average CrowdStrike Holdings stock price target implies downside potential of 2.35%.
Conclusion: Bearish on S, Neutral on CRWD
Ultimately, the only reason CrowdStrike didn’t receive a bullish rating is because a pullback could be imminent, potentially presenting an opportunity to pick up shares of this rapidly-growing company at a small discount to current prices.
In fact, investors who can stomach buying CrowdStrike high could still see sizable gains over the very long term, given the stock’s long-term gains. Additionally, when the company becomes profitable on a full-year basis, we will likely see another sizable pop in its stock price. Importantly, CrowdStrike recently recorded its third straight quarter of GAAP (generally accepted accounting principles) profitability.
On the other hand, SentinelOne is a fraction of the size of CrowdStrike, with only $573 million in revenue for the last 12 months versus CrowdStrike’s $2.8 billion in revenue. Further, SentinelOne’s stock has actually depreciated over the long term, falling 38% since the IPO in June 2021 and making CrowdStrike the clear winner.
