On Friday, BTIG adjusted its outlook on SentinelOne Inc (NYNYSE:SE: S), reducing the cybersecurity firm's price target to $23 from the previous $30, while keeping a Buy rating on the shares.
The adjustment follows SentinelOne's first-quarter earnings report, which fell short of expectations, with the company posting an annual recurring revenue (ARR) of $762 million, a year-over-year increase of 35%. This result was slightly below BTIG's estimate of $767 million and the consensus expectation of $765 million.
The company also revised its fiscal year 2025 revenue guidance downward by approximately 0.5%, setting the new midpoint at $811.5 million, which indicates a 31% growth from the previously projected $815 million. In recent weeks, investor sentiment towards SentinelOne has been generally negative, with mounting concerns over competitive pressures, go-to-market strategy changes, and the company's exposure to the small and medium-sized business (SMB) segment.
Despite the lower-than-anticipated growth in net new ARR, which saw a 10% year-over-year decline, not all indicators were negative. SentinelOne reported strong performance in its emerging product lines, particularly in Data Lake and Cloud Security. Additionally, the company achieved significantly better operating margins than anticipated and marked a positive turn in free cash flow for the first time in its history.
BTIG acknowledged the challenging macroeconomic environment, which has led to weaker trends across the software sector this quarter.
Nevertheless, with SentinelOne's stock trading at just over 5 times enterprise value to sales, BTIG believes the valuation remains attractive for a company with a growth trajectory of over 25%. The firm's maintained Buy rating reflects confidence in SentinelOne's long-term prospects despite the current headwinds.
InvestingPro Insights
As SentinelOne Inc (NYSE: S) navigates a challenging economic landscape, the latest InvestingPro data reveals a mixed financial picture. The company's market capitalization stands at $6.05 billion, reflecting investor valuation of its growth potential. A notable highlight is SentinelOne’s significant revenue growth over the last twelve months, with a 47.13% increase, signaling strong demand for its cybersecurity solutions despite the broader market concerns.
InvestingPro Tips suggest that SentinelOne holds more cash than debt on its balance sheet, which could provide it with a buffer against ongoing market volatility and competitive pressures. Additionally, the company's liquid assets exceed short-term obligations, underscoring a solid liquidity position that may support its operational and strategic initiatives. These tips, along with many others, are available through InvestingPro's comprehensive service. For those interested in a deeper analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
However, investors should be aware that SentinelOne has not been profitable over the last twelve months, with a negative operating income margin of -59.84%. Moreover, the stock has experienced a sharp decline, with a 31.06% drop over the last three months. Analysts predict profitability within this year, which could be a turning point for the company's financial performance. For further insights and a total of 7 additional InvestingPro Tips, visit https://www.investing.com/pro/S.
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