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On Thursday, BofA Securities adjusted its stance on SentinelOne Inc (NYSE:S), moving the cybersecurity company’s stock rating from Buy to Neutral and lowering the price target to $21 from $24. The downgrade follows SentinelOne’s latest financial report, which presented a mixed set of results. According to InvestingPro data, the company currently appears undervalued compared to its Fair Value, despite 22 analysts recently revising their earnings expectations downward.
SentinelOne’s revenue growth of 23% year-over-year outpaced analysts’ expectations by 1%, contributing to total revenue of $821.46 million, with an impressive gross margin of 74.3%. However, the company’s Annual Recurring Revenue (ARR) growth fell short by 60 basis points compared to Street forecasts. Additionally, the company’s forward guidance did not meet market expectations. BofA Securities pointed out that while the endpoint security market remains promising, SentinelOne’s recent performance has raised concerns. InvestingPro analysis reveals the company maintains strong liquidity with a current ratio of 1.74 and holds more cash than debt on its balance sheet.
The firm highlighted that SentinelOne’s results have been lackluster for several quarters, marking two consecutive periods of reduced guidance. Furthermore, despite having an 80% smaller revenue base, SentinelOne is growing at rates comparable to its peer CrowdStrike (NASDAQ:CRWD), yet it operates with approximately 650 basis points lower profitability when adjusted for scale. Get deeper insights into SentinelOne’s financial health and growth prospects with a comprehensive Pro Research Report, available exclusively on InvestingPro, along with 8 additional key ProTips for informed investment decisions.
SentinelOne’s stock performance has also been disappointing relative to the broader market, underperforming the NASDAQ by 1000 basis points year to date and by 1860 basis points over the past 12 months, with InvestingPro data showing a significant 29.62% decline over the past six months. This underperformance has contributed to BofA Securities’ decision to downgrade the stock.
The revised price objective of $21 is based on a 5 times multiple of SentinelOne’s estimated 2026 enterprise value to sales ratio, a reduction from the previous 6 times multiple. The adjustment reflects the firm’s recalibrated expectations for SentinelOne’s financial trajectory in the coming years.
In other recent news, SentinelOne Inc has reported mixed first-quarter earnings for fiscal year 2026. The company experienced a slight revenue beat but fell short on net new annual recurring revenue and billings, prompting a downward revision of its revenue forecast due to economic uncertainties. Analysts at Cantor Fitzgerald remain optimistic, maintaining a $24 price target and expecting a recovery in NNARR in the next quarter. Meanwhile, TD Cowen adjusted its price target to $24, citing macroeconomic challenges, but continues to hold a Buy rating. Bernstein SocGen also revised its target to $25, attributing the change to economic challenges in April that impacted earnings.
Scotiabank (TSX:BNS) lowered its target to $18, maintaining a Sector Perform rating, while highlighting SentinelOne’s longer sales cycles and missed deals. JPMorgan downgraded SentinelOne from Overweight to Neutral, reducing the price target to $19 due to growth concerns following the company’s third ARR miss in five quarters. Despite these challenges, SentinelOne has shown growth in key segments such as Cloud, AI, and Data, with international revenue increasing by 27% year-over-year. The company has also authorized a share repurchase, signaling confidence in its prospects.
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