Scotiabank cuts SentinelOne stock target to $18, holds rating

On Thursday, Scotiabank (TSX:BNS) analyst Patrick Colville adjusted the price target for SentinelOne Inc (NYSE:S) shares, bringing it down to $18.00 from the previous $19.00, while keeping a Sector Perform rating on the stock. According to InvestingPro data, analyst targets for SentinelOne range from $17 to $36, with 22 analysts recently revising their earnings estimates downward. The stock has declined nearly 30% over the past six months. The revision follows SentinelOne’s first-quarter results, which showed a decline in new Annual Recurring Revenue (ARR). The analyst noted that the company experienced longer sales cycles and missed deals in April, coinciding with what was described as the "DOGE and Tariff tsunami." Despite challenges, InvestingPro data shows the company maintaining a robust 74.3% gross profit margin and achieving 32.25% revenue growth in the last twelve months. Get deeper insights with InvestingPro’s comprehensive research report, available for over 1,400 US stocks.

Colville’s report highlighted that SentinelOne’s management anticipates a year-over-year (Y/Y) drop in F26 net new ARR. This outlook is seen as a setback, especially considering SentinelOne’s partnership with Lenovo and in light of a past outage incident at competitor CrowdStrike (NASDAQ:CRWD) in 2024. Despite recognizing SentinelOne’s substantial year-over-year improvement in operating margins, the analyst expressed concerns about the company’s potential to compete against larger industry players like CrowdStrike and Microsoft (NASDAQ:MSFT), especially if investment is capped. InvestingPro analysis indicates the company holds more cash than debt and maintains strong liquidity, with current assets exceeding short-term obligations by a ratio of 1.74.

In a positive note, SentinelOne has announced a share repurchase authorization, which Colville interprets as a strong signal of confidence from the company. Acknowledging SentinelOne as a leading entity in the cybersecurity sector, Scotiabank remains watchful, looking for evidence from Chief Information Security Officer (CISO) checks that could indicate a positive shift in business momentum before altering their stance on the stock. While currently unprofitable, InvestingPro analysts project the company will achieve profitability this year, with an EPS forecast of $0.20 for FY2026.

In other recent news, SentinelOne has reported its first-quarter results for fiscal year 2026, showing revenue of $229 million, which marks a 23% increase year-over-year and slightly surpasses the consensus estimate of $228.2 million. Despite this revenue growth, the company’s Annual Recurring Revenue (ARR) of $948.1 million narrowly missed the consensus projection of $952.3 million. SentinelOne also revised its full-year revenue forecast to a midpoint of $998.5 million, reflecting a 21.5% growth, slightly down from the previously forecasted $1,009.5 million.

JPMorgan downgraded SentinelOne from Overweight to Neutral, citing concerns over growth after the company missed its ARR projections for the third time in five quarters. Analysts at DA Davidson also maintained a Neutral rating, reducing the price target to $17, following a year-over-year decline in net new ARR. Meanwhile, BTIG adjusted its price target to $21 but maintained a Buy rating, expressing confidence in SentinelOne’s potential to maintain over 20% growth.

Citizens JMP reiterated a Market Outperform rating with a $29 target, highlighting the company’s strong free cash flow margin of 20%, which doubled the anticipated consensus. However, Wells Fargo (NYSE:WFC) downgraded SentinelOne to Equal Weight, reducing the price target to $18, due to a disappointing first quarter and a decline in net new ARR. These developments reflect varying perspectives among analysts on SentinelOne’s growth prospects amid macroeconomic uncertainties.

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