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On Thursday, DA Davidson analyst Rudy Kessinger revised the price target for SentinelOne Inc (NYSE:S) shares, reducing it to $18.00 from the previous $25.00, while maintaining a Neutral rating on the stock. According to InvestingPro data, the stock, currently trading at $18.75, appears slightly undervalued based on Fair Value analysis. Analyst targets for the company range from $18 to $36, with an overall consensus recommendation leaning towards Buy. Kessinger’s assessment followed SentinelOne’s reported annual recurring revenue (ARR) for the fourth quarter, which at $920.1 million marked a 27% year-over-year increase, albeit slightly below the consensus estimate of $921.0 million. The company, with a market capitalization of $6 billion, has demonstrated strong revenue growth, with InvestingPro data showing a 34.4% increase in the last twelve months. While currently unprofitable, analysts predict profitability in the current fiscal year.
The company’s net new annual recurring revenue (NNARR) remained approximately flat year-over-year, compared to a 4% increase in the previous quarter. Kessinger noted that without the impact of sunsetting Attivo, NNARR would have shown a mid-single-digit growth year-over-year. SentinelOne’s forecast for revenue growth for fiscal year 2026 is set at 23% year-over-year, which is slightly below the consensus projections of 26% year-over-year, with about a one percentage point impact due to the sunsetting.
In terms of guidance, SentinelOne’s ARR was directed below consensus expectations. However, when adjusted for the sunsetting, the ARR growth was less than one percentage point below consensus, and the NNARR growth was approximately 1.5 percentage points below. InvestingPro analysis reveals the company maintains strong financial fundamentals with a healthy current ratio of 1.63 and holds more cash than debt on its balance sheet. Get access to 6 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report, available for over 1,400 US stocks. Kessinger expressed skepticism regarding the company’s potential for significant improvements in NNARR growth, given the increasingly difficult comparisons in the future.
In his statement, Kessinger explained, "Substantial improvements in NNARR growth against increasingly tough compares do not look easily achievable to us." This sentiment underpins the decision to maintain the Neutral rating while lowering the price target from $25 to $18 for SentinelOne stock.
In other recent news, SentinelOne Inc has experienced a series of developments that are drawing attention from investors. The company reported a 27% year-over-year growth in annual recurring revenue (ARR), reaching $920.1 million, but this figure slightly missed consensus expectations. SentinelOne’s guidance for fiscal year 2026 also fell short, with a projected $16 million shortfall in ARR, partly due to the discontinuation of its Deception product. Despite these challenges, SentinelOne’s management remains optimistic about achieving approximately $200 million in net new ARR for fiscal year 26, resulting in a projected ARR of around $1.12 billion, which includes the impact of retiring their legacy solution.
Analysts have reacted to these mixed results with adjustments to SentinelOne’s stock price targets. Piper Sandler lowered the price target to $28 while maintaining an Overweight rating, citing the company’s robust growth despite some challenges. Citi reduced its target to $21, maintaining a Neutral rating, pointing out a modest revenue beat but concerns over future growth in an uncertain macroeconomic environment. Needham cut its target to $23 but retained a Buy rating, noting positive demand trends and new solution adoptions. Scotiabank (TSX:BNS) adjusted its target to $19, maintaining a Sector Perform rating, acknowledging SentinelOne’s positive operating margin milestone but advising caution until further growth evidence emerges.
SentinelOne’s recent achievements, such as its first positive operating margin and significant customer growth, are seen as key strengths. However, the company faces skepticism regarding its forecasted ramp-up in ARR and revenue amid rising macroeconomic uncertainties. Investors and analysts are closely watching how SentinelOne navigates these challenges and leverages its expanding portfolio of solutions.
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