The evolving digital landscape continues to be subject to the ever-present cybersecurity threats from bad actors or single points of failure, as the recent CrowdStrike (CRWD) initiated system outage has reminded us. However, a misfortune for one could be a gain for another. In the wake of CrowdStrike’s stunning incident, competing cybersecurity firms like SentinelOne (S) can benefit, as exemplified by its shares surging 60% year-to-date, punctuated by a 21% jump in the past five days.
Despite this recent turbulence, cybersecurity remains a thriving sector with an expected growth rate of 12.3% annually. It could reach $500.7 billion by 2030, with the potential for the industry to grow into a $2 trillion opportunity. Investors may want to add this to their watch list, especially those considering alternatives to CrowdStrike, and look for signs that the headline-driven buzz translates to an earnings boost.
SentinelOne may benefit from CrowdStrike’s misfortunes.
SentinelOne serves both domestic and international markets by developing and providing AI-driven cybersecurity. The company offers numerous cybersecurity solutions, including endpoint protection, detection and response, cloud and identity security, attack surface management, mobile endpoint security, XDR power tools, Watchtower, and Vigilance MDR.
The company has already reported broad-based double-digit customer growth this year, with a 30% year-over-year increase in large enterprise customers. As a leading alternative to CrowdStrike in endpoint security, signs that this metric has accelerated due to the CrowdStrike-caused global IT outage would be a strong indicator of potential revenue and earnings growth to follow.
Analysis of SentinelOne’s Recent Financial Results & Outlook
The company posted solid gains for the first quarter of the Fiscal year 2025. Reporting robust growth in new customer acquisitions, existing customer renewals, and upsells. The company reported a total revenue high of $186.4 million, an impressive leap of 40% from the same period in 2024. The annualized recurring revenue (ARR) also saw a significant increase of 35% to $762 million.
Also, the gross margin reached 73%, a 5% improvement from the previous year, while the non-GAAP gross margin reached 79%, up from 75%. The company saw a positive shift in operating cash flow margin of 23%, significantly improving from the negative 21% in the first quarter of the previous fiscal year.
The company has also reported on cash, cash equivalents, and investments totaling $1.1 billion for the quarter.
Management has issued guidance, with revenue for the second quarter estimated at around $197 million, a 32% year-over-year growth. The anticipated revenue for Fiscal year 2025 is projected at $808-815 million, an increase of 31% at the midpoint. Non-GAAP gross margin projection of 79% for Q2, and for full-year FY25, it is expected to stand between 78-79%. Investors should look for an upward revision of these projections as another confirming indicator that the CrowdStrike event is translating into gains for the firm.
What Is the Price Target for S Stock?
The stock has demonstrated higher volatility than the market, with a beta of 1.7, ranging between $13.87 and $30.76 in the past year. It trades toward the middle of that range while showing positive price momentum, trading above its 20-day (19.78) and 50-day (20.15) moving averages. Its P/S ratio of 10.42x indicates that it is fairly valued compared to the Software Infrastructure industry average of 9.72x.
Analysts following the company have mostly been constructive on the stock. For instance, Robert W. Baird analyst Shrenik Kothari, a five-star analyst according to Tipranks’ ratings, recently initiated coverage on the shares with an Outperform rating and a $25 price target, noting the company is poised for continued growth and profitability.
SentinelOne is rated a Moderate Buy overall based on the recommendations and price targets issued by 20 analysts. The average price target for S stock is $25.08, representing a potential 7.13% upside from current levels. However, I suspect those targets may be revised upward based on a possible acceleration of customer acquisition post-CrowdStrike’s misfortunes.
SentinelOne in Summary
With the cybersecurity sector experiencing some potential upheaval, SentinelOne is well-positioned to solidify its foothold in the industry. The stock has already seen a sharp increase, showing its potential to cash in on fallout from CrowdStrike’s system outage in the short term and the market’s projected longer-term expansion. This presents an opportune moment for investors to keep a close watch on SentinelOne for signs that the company has indeed seized upon recent events to bolster its competitive stance in the market.
