Impressive Growth and Solid Catalysts
Cybersecurity firm SentinelOne Stock has seen an impressive 86% growth in the past year, rewarding its investors with substantial returns. Despite its current high valuation, trading at 15 times sales, a deeper look at the company’s growth trajectory and solid catalysts suggests that it can justify its valuation and continue to deliver more upside in the long run.
The company’s fiscal 2024 third-quarter results showed a significant increase in revenue and a sharp decline in its loss per share, leading to an upward revision of its full-year outlook. SentinelOne’s revenue rose by 42% year over year to $164 million during the quarter, and its non-GAAP net loss shrunk to just $0.03 per share from $0.16 per share in the year-ago quarter. These figures exceeded consensus estimates, and the company has now raised its full-year revenue guidance to $616 million from its earlier estimate of $605 million.
SentinelOne Stock: Riding the AI Wave
SentinelOne stock robust growth can be attributed to the healthy increase in its customer count and higher customer spending. The company’s overall customer count increased 28% year over year in fiscal Q3 to 11,500, and the number of customers with annualized recurring revenue (ARR) of more than $100,000 increased at a faster pace of 33% to 1,060.
The company credits the strong demand for its AI-powered security solution for this robust growth. In April 2023, SentinelOne announced Purple AI, a generative AI cybersecurity assistant designed to enhance investigations, simplify threat hunting, make recommendations, and automate actions. The rollout of this product has already begun, and SentinelOne plans to make this AI-powered cybersecurity tool generally available to customers from the current quarter.
A Bright Future Ahead
Financial services firm BTIG predicts that SentinelOne stock has the ability to gain more market share in the cybersecurity space thanks to its new products, including Purple AI. The growing adoption of generative AI in the cybersecurity space should open a long-term growth opportunity for SentinelOne. Generative AI-focused cybersecurity spending is expected to jump from just $9 million in 2022 to almost $14 billion in 2032, according to Bloomberg Intelligence.
This explains why analysts are anticipating its bottom line to increase at a compound annual growth rate (CAGR) of 40% for the next five years. That could translate into a higher stock price. SentinelOne is expected to become profitable on a non-GAAP basis in the new fiscal year following fiscal 2024’s estimated loss of $0.29 per share.
Also, SentinelOne’s revenue could cross the $1 billion mark in a couple of years. That would indicate 30%-plus sales growth over that period. The long-term opportunity in the generative AI cybersecurity space suggests that it can sustain that momentum for a longer time. Assuming SentinelOne does hit $1 billion in revenue in fiscal 2026 and maintains its current sales multiple of 15, its market capitalization could increase to $15 billion. That would be a jump of 73% from current levels in a couple of years.
Therefore, investors looking to buy an AI stock that’s benefiting from the adoption of this technology in the cybersecurity market may want to take a closer look at SentinelOne now. However, before you invest, consider the advice of experts. For instance, The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for investors to buy now, and SentinelOne wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
