Is it too late to buy SentinelOne stock?

cyber security company Sentinel One (S 3.30%) The stock price has soared so far in 2024. In fact, the stock more than doubled from a 52-week low of $12.43 last June to a high of $30.76 last Valentine’s Day.

SentinelOne’s stock price hit a record high on February 14th. bank of america We upgrade the stock from a Neutral rating to Buy. With the stock still hovering near these highs, it’s reasonable to wonder if it’s now too late to buy SentinelOne stock.

Let’s take a closer look at SentinelOne to determine whether it still makes sense to invest in this cybersecurity company despite its rising stock price. Now would be a good time to do so, as the company’s next earnings report for its fiscal fourth quarter (ending January 31) is scheduled for March 13.

SentinelOne faces the pros and cons of the industry.

SentinelOne benefits from operating in the cybersecurity industry where organizations need to be protected from cybercriminals regardless of their level of digital use – whether it’s websites, emails, customer data or financial records.

Due to this environment, the cybersecurity industry is expected to reach $183 billion in 2024 and grow to $274 billion by 2028. Therefore, demand for cybersecurity services is strong, which provides multi-year revenue generation for SentinelOne.

However, operating in an industry with high customer demand can also be a challenge, as competition is fierce. As a result, numerous companies exist dedicated to cybersecurity, including: Crowd Strike and Palo Alto Networks. Add to this several companies that offer cybersecurity as part of their digital solutions: microsoft, IBMand cisco systems.

So a key factor when evaluating SentinelOne as an investment is how well the company is capturing share in the crowded cybersecurity market. One way to measure this is to look at growth in customer numbers, and SentinelOne is doing well here.

In the fiscal third quarter ended October 31, 2023, SentinelOne had more than 11,500 customers. Compare that to the 4,700 customers it had in the first quarter of fiscal 2021, the quarter before the company’s IPO in June of that year. In just two and a half years, SentinelOne achieved impressive customer growth of 145%.

SentinelOne’s Success History

Along with the number of customers, it’s also helpful to look at SentinelOne’s annual recurring revenue (ARR), or run rate, generated from the company’s customers. This provides insight into SentinelOne’s ability to not only acquire new customers but also increase spending on SentinelOne solutions.

In the fiscal third quarter, ARR reached $663.9 million, up 43% from the previous year. This ARR growth was reflected in SentinelOne’s third quarter revenue of $164.2 million, a 42% increase year-over-year. And the third quarter was the most recent quarter to see multi-year revenue growth since its 2021 IPO.

Data from YCharts.

This sales streak is expected to continue. SentinelOne expects fiscal fourth-quarter revenue to be $169 million, up double digits from $126.1 million a year ago. The company’s customer, ARR, and revenue growth demonstrate that SentinelOne is successfully winning customers over with its cybersecurity solutions.

The company’s platform has been incorporating artificial intelligence since SentinelOne was founded in 2013. AI-based solutions are fast and efficient, able to identify and proactively address cyberattacks without human intervention.

These AI capabilities help SentinelOne keep pace with the tools available to cybercriminals, as AI gained prominence with the advent of ChatGPT last year. In fact, SentinelOne discovered cyberattack software that integrated ChatGPT to perform hacking using AI.

Other Considerations for SentinelOne Stock

Despite strong customer and revenue growth, the company is not profitable. SentinelOne ended its fiscal third quarter with a net loss of $70.3 million. However, this is an improvement over the previous year’s net loss of $98.9 million. SentinelOne has taken several cost-cutting measures as it strives to achieve profitability next year.

In the third quarter of the fiscal year, the company’s balance sheet was in excellent shape. Total assets were $2.2 billion, far exceeding total liabilities of $615 million. Cash, cash equivalents and investments alone were $1.1 billion.

Despite SentinelOne’s rapid rise in stock price over the past year, the company’s stock price is still below its IPO price of $35. So it wouldn’t be a stretch to see strong fiscal fourth-quarter results potentially pushing the stock higher than its recent 52-week highs. In fact, Bank of America set its price target at $35.

Given SentinelOne’s history of customer and revenue growth, improving earnings, and strong balance sheet, SentinelOne stock appears to be a buy.