$S A Big Fish In A Big Pond
After sharing disappointing Q1 results, SentinelOne, Inc. (NYSE: S) saw its stock fall more than 35% to an all-time low. However, S stock has been gaining momentum lately as many investors believe the sell-off on the earnings may be an overreaction. With this in mind, S has continued to grow its customers – albeit less than expected – and is operating in the vast cybersecurity market that is expected to continue growing over the coming years. Given the company’s status as a cybersecurity leader, S stock could be poised to return to its pre-earnings level soon.
S Fundamentals
Disappointing Q1
S missed on its Q1 2024 revenue forecast by $3.22 million, which led to S stock dropping more than 35%. The revenue shortfall was primarily caused by S changing the way it calculates its annual recurring revenue (ARR) and discovering inaccuracies in its previous accounting, which caused it to reduce its ARR by $27 million.
Moreover, S cut its 2024 revenue guidance to $600 million from the previous guidance of $640 million. While the current guidance represents 41% YoY growth, investors have not taken the news well as they questioned the reliability of the company.
Customers Growth
While the revenue miss and the guidance reduction paint the company in a bad light, S is still showing a lot of strong points. S achieved a 125% net retention rate (NRR) in Q1 2024, while it is a decline from the previous quarter it is still well above its 120% target.
Furthermore, S saw a 43% growth in its customers and a 61% increase in customers spending more than $100,000. It is also worth mentioning that S has added a new Fortune 10 customer, making it the cybersecurity platform choice for half of the Fortune 10.
That indicates that while spending is slowing down for the year, S is still adding customers at a fast rate which can mean that when the macroeconomic situation improves further S can return to its previous growth rate.
S can also expand its customer base with its new AI tool, Purple AI, which aims to assist threat hunters in making timely analyses and diagnoses, as well as its new integration with Wiz to provide end-to-end cloud security.
Undervalued Market
While competition in the cybersecurity space is fierce with competitors such as Microsoft (NASDAQ: MSFT), Cloudflare (NYSE: NET), and CrowdStrike (NASDAQ: CRWD), S is still in a position to capture a large portion of the market because it has half of the Fortune 10 as customers.
Moreover, McKinsey & Company believes the corporate sector should invest $2 trillion per year in cybersecurity – more than 10 fold of the current spending of around $150 billion. That means that S revenue could increase by more than 1000% in the next few years, which could cause S stock and other cybersecurity stocks to skyrocket in value.
S Financials
In its Q1 2024 report, S’ assets decreased by 2% QoQ from $2.258 billion to $2.212 billion, and its cash and cash equivalents increased by 8% QoQ from $137.9 million to $150 million. S’ total liabilities decreased by 1.2% QoQ from $602 million to $595 million.
Revenue also increased 70% YoY from $78 million to $133 million. Operating costs increased more than 70% from $141 million to $206 million, which contributed to the operating loss increase of 27% YoY from $90 million to $115 million. As a result, S’ net loss increased 19% YoY to $106 million.
Technical Analysis
S stock’s trend is bullish with the stock trading in an upwards channel. Looking at the indicators, the stock is trading above the 50 and 21 MAs which are bullish indications, and is trading below the 200 MA which is a bearish indication. Meanwhile, the RSI is neutral at 51 and the MACD is neutral as well. It is also worth noting that there’s a gap near the $22 that may be filled in the future.
As for the fundamentals, S stock just witnessed a catalyst in its Q1 2024 earnings. While the company reported disappointing earnings, S still witnessed growth in customers and revenues which could further grow as the macroeconomic situation improves – making the current dip a good entry point for long-term investors.
S Forecast
While S has announced disappointing Q1 results, it still has many positive aspects with its new cybersecurity AI product Purple AI and its integration with Wiz. Furthermore, S is still maintaining its high customer retention rate. All that coupled with the cybersecurity market being undervalued currently makes S stock one to keep an eye on, especially with the recent dip.
S Fundamentals
Disappointing Q1
S missed on its Q1 2024 revenue forecast by $3.22 million, which led to S stock dropping more than 35%. The revenue shortfall was primarily caused by S changing the way it calculates its annual recurring revenue (ARR) and discovering inaccuracies in its previous accounting, which caused it to reduce its ARR by $27 million.
Moreover, S cut its 2024 revenue guidance to $600 million from the previous guidance of $640 million. While the current guidance represents 41% YoY growth, investors have not taken the news well as they questioned the reliability of the company.
Customers Growth
While the revenue miss and the guidance reduction paint the company in a bad light, S is still showing a lot of strong points. S achieved a 125% net retention rate (NRR) in Q1 2024, while it is a decline from the previous quarter it is still well above its 120% target.
Furthermore, S saw a 43% growth in its customers and a 61% increase in customers spending more than $100,000. It is also worth mentioning that S has added a new Fortune 10 customer, making it the cybersecurity platform choice for half of the Fortune 10.
That indicates that while spending is slowing down for the year, S is still adding customers at a fast rate which can mean that when the macroeconomic situation improves further S can return to its previous growth rate.
S can also expand its customer base with its new AI tool, Purple AI, which aims to assist threat hunters in making timely analyses and diagnoses, as well as its new integration with Wiz to provide end-to-end cloud security.
Undervalued Market
While competition in the cybersecurity space is fierce with competitors such as Microsoft (NASDAQ: MSFT), Cloudflare (NYSE: NET), and CrowdStrike (NASDAQ: CRWD), S is still in a position to capture a large portion of the market because it has half of the Fortune 10 as customers.
Moreover, McKinsey & Company believes the corporate sector should invest $2 trillion per year in cybersecurity – more than 10 fold of the current spending of around $150 billion. That means that S revenue could increase by more than 1000% in the next few years, which could cause S stock and other cybersecurity stocks to skyrocket in value.
S Financials
In its Q1 2024 report, S’ assets decreased by 2% QoQ from $2.258 billion to $2.212 billion, and its cash and cash equivalents increased by 8% QoQ from $137.9 million to $150 million. S’ total liabilities decreased by 1.2% QoQ from $602 million to $595 million.
Revenue also increased 70% YoY from $78 million to $133 million. Operating costs increased more than 70% from $141 million to $206 million, which contributed to the operating loss increase of 27% YoY from $90 million to $115 million. As a result, S’ net loss increased 19% YoY to $106 million.
Technical Analysis
S stock’s trend is bullish with the stock trading in an upwards channel. Looking at the indicators, the stock is trading above the 50 and 21 MAs which are bullish indications, and is trading below the 200 MA which is a bearish indication. Meanwhile, the RSI is neutral at 51 and the MACD is neutral as well. It is also worth noting that there’s a gap near the $22 that may be filled in the future.
As for the fundamentals, S stock just witnessed a catalyst in its Q1 2024 earnings. While the company reported disappointing earnings, S still witnessed growth in customers and revenues which could further grow as the macroeconomic situation improves – making the current dip a good entry point for long-term investors.
S Forecast
While S has announced disappointing Q1 results, it still has many positive aspects with its new cybersecurity AI product Purple AI and its integration with Wiz. Furthermore, S is still maintaining its high customer retention rate. All that coupled with the cybersecurity market being undervalued currently makes S stock one to keep an eye on, especially with the recent dip.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.