Will SentinelOne's Shares Potentially Surge in 2025?
Will SentinelOne's Shares Potentially Surge in 2025?
The cybersecurity sector is a profitable yet congested market. According to Fortune Business Insights, this industry is anticipated to expand at a yearly compound growth rate (CAGR) of 14% until 2032. This expansion may raise all industry stocks gradually.
However, investing in this industry might not be a breeze due to its competitiveness. Numerous rising companies and well-established tech giants provide cybersecurity solutions, which could put pressure on cybersecurity stocks in the long run.
Despite the competition, SentinelOne (S 1.06%) appears to have an edge with its AI-enhanced cybersecurity products. This could open up an opportunity that some investors might have missed out on.
What makes SentinelOne stand out
SentinelOne is recognized for its AI-driven cybersecurity solutions. Its Singularity platform is regarded as "top-notch security," incorporating functions such as data ingestion, threat intelligence support, and automation capabilities. Additionally, its capability to track security threats aids in easier investigation of attacks.
The attention-grabber in Singularity is Purple AI. Purple AI is a component of Singularity that automates security alert triage, threat detection, and investigations, making the platform's security operations more manageable.
Moreover, its natural language understanding capability simplifies its use. These features have contributed to Purple AI becoming one of the company's fastest-growing solutions to date.
The industry has recognized SentinelOne for its efforts. Gartner placed SentinelOne in its "Magic Quadrant" for endpoint protection, and CRN declared Singularity its cloud security product of the year.
Furthermore, although it no longer discloses overall customer numbers, the number of clients spending at least $100,000 annually on the platform increased by 24% to 1,310, and the number of clients spending $1 million or more reached an all-time high. The reluctance of organizations to switch cybersecurity providers indicates that SentinelOne and its investors are benefiting from this growth.
SentinelOne's financials
SentinelOne's financials appear to reflect customer growth. The company reported revenue of $596 million for the first nine months of fiscal 2025 (ended Oct. 31), marking a 33% year-over-year increase. Over the same period, it managed to limit the growth in operating expenses to 13%.
Unfortunately, that was not sufficient to cover operating expenses, resulting in a loss of $218 million in the first three quarters of fiscal 2025. Although this was an improvement from the $267 million loss in the same year-ago period, it suggests that SentinelOne will likely remain unprofitable in the near future.
The company projects a 32% revenue growth for fiscal 2025. However, analysts forecast a slowdown to 26% in 2026. Despite this growth exceeding the forecast industry CAGR, investors often sell stocks when revenue growth rates decrease. This could prove detrimental for investors aiming to profit from this opportunity.
SentinelOne's stock performance has been mixed so far. It has surged more than 60% since hitting its all-time low at the end of 2022. Yet, it has shown little momentum this year, and its trajectory for the next year remains unclear.
However, its valuation could draw investors to the stock. As a money-losing company, SentinelOne's P/E ratio is not applicable. Nevertheless, its price-to-sales (P/S) ratio of 9.6 is lower than that of every major cybersecurity stock except for Okta and Check Point Software. This differential and comparatively low sales multiple could make SentinelOne an appealing option for more customers adopting its AI-driven tools.
Is 2025 the year for SentinelOne?
The short-term direction of SentinelOne stock remains uncertain, but the growing popularity of its AI-driven security software could benefit the company. The emphasis on AI has led to significant customer growth, particularly among its largest clients, and this has significantly impacted its finances.
Admittedly, SentinelOne has numerous competitors, and the slowdown in revenue growth and ongoing losses could become increasingly concerning. Nonetheless, revenue levels are expected to continue rising substantially, and given its comparatively low valuation, its stock has a high probability of outperforming the market in the long term.
In light of its impressive growth and recognition in the cybersecurity industry, some investors might consider investing in SentinelOne, despite the ongoing competition and the company's current unprofitability. The company's relatively low price-to-sales (P/S) ratio compared to its competitors could make it an appealing option for those seeking to adopt AI-driven security tools.
Furthermore, SentinelOne's strong financial performance in terms of revenue growth and limited increase in operating expenses suggests that investing in the company could potentially yield long-term profits, given its innovative AI-driven solutions and growing customer base.