On Wednesday, UBS analysts downgraded SentinelOne Inc (NYNYSE:SE:S) from Buy to Neutral.
The decision follows a noticeable decline in the company’s shares, which fell by 21% from third-quarter earnings per share (EPS) to the year’s end. The analysts pointed out that investor confidence in the competitive landscape of the endpoint security sector has diminished, along with the enthusiasm for growth catalysts in the calendar year 2025, such as the partnership with Lenovo.
According to the analysts, while the market has partially accounted for these concerns, there is still a risk to the consensus revenue estimates, which predict $214 million in net new annual recurring revenue (NNARR).
Investors are preparing for more conservative guidance, but the pressure remains for SentinelOne to deliver significant returns. This would necessitate a substantial increase in NNARR, with the company having added $192 million and $196 million organically in calendar years 2023 and 2024, respectively. The analysts’ model anticipates $203 million in NNARR.
For UBS to view the stock more favorably, evidence would be required showing that SentinelOne is gaining significant momentum from the CrowdStrike incident and securing competitive takeovers.
Additionally, a more substantial contribution than currently anticipated from the new Lenovo agreement would also be a positive indicator. Analysts suggested that investors might respond better if management indicated a stronger commitment to investing in growth, even at the cost of margin expansion.
Conversely, the analyst warned that signs of increased pricing pressure from competitors like Palo Alto Networks and CrowdStrike, leading to SentinelOne also offering greater discounts or experiencing market share loss, would be a negative development for the stock.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.