On Wednesday, Goldman Sachs (NYSE:GS) updated its outlook on shares of SentinelOne Inc (NYNYSE:SE: S), increasing the price target to $25 from the previous $23, while keeping a Neutral rating on the stock. The adjustment reflects the firm's anticipation of potential market share gains for SentinelOne in the cybersecurity sector following a recent service disruption at competitor CrowdStrike (NASDAQ:CRWD) on July 19.
The Goldman Sachs analyst highlighted SentinelOne's technological strengths, such as its artificial intelligence models that require less frequent updates and a reduced dependency on the kernel. These advantages are seen as pivotal for the company as it competes in the cybersecurity space.
SentinelOne has reportedly seen a significant improvement in its sales pipeline and has engaged in discussions with customers looking to reassess their commitments with other providers, with some considering switching over to SentinelOne's services.
Despite the positive pipeline developments, SentinelOne remains cautious and has not factored this into its second-half guidance. The company notes that sales cycles usually span 9 to 12 months, and it is still determining the expected conversion rate from these opportunities.
SentinelOne's ability to cross-sell cloud modules, particularly in Linux-based environments, is also seen as a strong point, as industry feedback suggests it offers a superior solution for these systems.
Goldman Sachs maintains a Neutral stance on SentinelOne, acknowledging the company's impressive technology but also recognizing the challenges it faces in meeting the Rule of 40—a measure of growth and profitability—while competing against larger and more resourceful rivals.
The raised stock price target to $25 is based on an increased multiple of 7.5 times (up from 7.0 times) the projected sales for the fifth to eighth quarters, hinting at the firm's belief in SentinelOne's potential for market share expansion in the coming year.
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