Shares of cybersecurity company SentinelOne (S) gained in today’s trading as investors await its Q2 earnings results on August 29 after the market closes. Analysts are expecting earnings per share to come in at -$0.01 on revenue of $197.4 million. This equates to 87.5% and 31.8% year-over-year increases, respectively, according to TipRanks’ data.
This is ideal because earnings per share should grow faster than revenue as this demonstrates a high degree of operating and financial leverage in the business. It’s also worth noting that SentinelOne has beaten earnings estimates for 11 consecutive quarters.
And there are reasons to believe that this win streak could continue. In fact, according to TipRanks’ Bulls Say, Bears Say tool, bullish analysts point to the company’s growth opportunity in the Cloud Security down-market as a growth catalyst since mid-sized enterprises remain highly underpenetrated. They also seem to be confident about its new products and strategy, which they believe will attract new customers.
Nevertheless, it is important to not forget about the bearish arguments, which include a slowdown in annualized recurring revenue (ARR) due to tougher macro conditions and sales execution challenges. In addition, since investors are likely expecting the earnings beat streak to continue, a surprise miss will make the stock much more vulnerable to a large drop.
Options Traders Anticipate a Large Move
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a large 13.9% move in either direction.
Is SentinelOne a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SentinelOne stock based on 13 Buys, seven Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 47% rally in its share price over the past year, the average SentinelOne price target of $25.08 per share implies 2.12% upside potential.
