(NYSE:S) SentinelOne Share Price Plummets On FY 2025 Outlook, Gets Target Upgrades

In a volatile session for tech stocks, shares of SentinelOne (NYSE: S), a leading cloud-based cybersecurity firm, tumbled by 16.64% following its latest earnings call, where the company's forecast for the fiscal year 2025 underwhelmed investor expectations.

Although the cybersecurity specialist exceeded revenue forecasts for the fiscal fourth quarter of 2024, posting $174 million against the anticipated $169 million, it's the future that seems to concern shareholders. SentinelOne's guidance for fiscal 2025 suggests revenue of between $812 million and $818 million (consensus $815.8m), indicating a growth rate of about 31%.

While this may seem robust at a glance, it represents a significant deceleration from the 47% growth pace the company forged in fiscal 2024. ARR was reported to have risen by 39% to the period ending Jan 31 2024.

The growth trajectory of SentinelOne has come under intense scrutiny as analysts compare it to the performance of its peers. A clear comparison can be drawn with competitor CrowdStrike (NASDAQ: CRWD), a rival in the cybersecurity space, which is expecting a growth rate ranging from 28% to 30% for the upcoming year.

However, while CrowdStrike boasts a staggering annual revenue surpassing $3 billion, it is also delivering positive free cash flow at a remarkable 31% margin, even after factoring in stock-based compensation. For comparison, CRWD was down just over 1% in the same trading session so this is not a broad stroke move.

The undercurrent of the sentiment driving SentinelOne's share price reduction seems to be rooted in perceived deeper financial performance issues. Despite showcasing strong growth rates, there is an air of scepticism about the company's capacity to deliver sustainable and profitable growth in the long run.

Simultaneous Price Target Upgrades For NYSE:S – What The Analysts Are Saying

Ending the day at $23.29 was a significant downside move, but it was paired against a swathe of analyst target adjustments (mostly upgrades). Here is how the street reacted

• DA Davidson (Neutral) price target raise to $24 (from $22). Comments to the tune that the ARR earnings beat was “very modest” in comparison to CRWD.
• Morgan Stanley (Overweight) raises to $29 (from $27) on “solid but below buyside forecasts” earnings.
• Bernstein (Outperform) increases PT to $37 (from $34).
• Loop Capital (Buy) increases target mark to $30 (from $28).
• Wells Fargo (Equal Weight) drops price target to $26 (from $28) noting 2025 FY guidance below expectations.

Whether the ongoing comparison with established industry competitors is the right guide to take for SentinelOne moving forward is open to question, but nevertheless will remain a constant. Investors and analysts are often wary of companies that show high growth rates but lack the foundational financial robustness, such as positive free cash flow, which is indicative of operational efficiency and profitability potential. SentinelOne's inability to present an improving financial narrative with its forward guidance could be the reason behind the hesitancy from many investors, accelerating the selloff of its stock.

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