On Friday, BofA Securities adjusted its outlook on SentinelOne Inc (NYNYSE:SE: S), a cybersecurity firm, reducing the price target on the company's stock to $29.00 from the previous $35.00. Despite this change, the firm has maintained its Buy rating on the shares.
The adjustment follows SentinelOne's post-market trading performance, where the stock experienced a 12% decline, primarily due to concerns over sales weakness and a modest reduction in the 2025 revenue guidance.
The analyst from BofA Securities acknowledged the challenges facing SentinelOne, noting a combination of current transitions in the company's Go-to-Market (GTM) strategies and broader macroeconomic softness.
Nonetheless, the firm remains optimistic about SentinelOne's prospects, anticipating improvement in the second half of the year and into fiscal year 2026. The expectation is that SentinelOne's investments in sales, internal control processes, and research and development will yield higher growth rates in the future.
SentinelOne's second-quarter performance indicated a free cash flow (FCF) margin of 18%, which is viewed positively as it provides funding for the company's current investments. In light of the recent quarter's weaknesses, BofA Securities has revised its estimates for SentinelOne and consequently lowered the price objective.
The new target is based on an 8 times FY26 enterprise value to sales multiple, a reduction from the previous 10 times, signaling a more cautious stance for the first half of the year.
The firm's reiteration of the Buy rating suggests confidence in SentinelOne's ability to navigate through the present challenges and capitalize on positive trends anticipated in the latter part of the year and beyond. The analysis reflects a balance between immediate concerns and the potential for recovery and growth in the medium term.
InvestingPro Insights
In line with the BofA Securities outlook on SentinelOne Inc (NYSE: S), InvestingPro data and tips provide further context into the company's financial health and stock performance. SentinelOne holds a market capitalization of $6.05 billion, reflecting its significant presence in the cybersecurity market. Despite not being profitable over the last twelve months, analysts are optimistic, predicting the company will turn profitable this year. This aligns with BofA Securities' positive outlook for the latter part of the year and into fiscal year 2026.
Recent performance metrics from InvestingPro show a notable 47.13% revenue growth in the last twelve months as of Q4 2024, indicating a strong sales trajectory. However, the stock has been under pressure, with a 31.06% decline over the last three months, which may have been factored into the revised price target by BofA Securities. This could present an opportunity for investors, as the current price is significantly lower than the fair value estimates by analysts, which stand at $28, and the InvestingPro fair value of $21.95.
For those seeking more in-depth analysis, InvestingPro offers additional tips on SentinelOne, which can be accessed at https://www.investing.com/pro/S. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of InvestingPro tips to guide your investment decisions.
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