SentinelOne, Curious Case of a Cyber Stock.
I always have a ‘thing’ for underdog stocks; especially if they are ‘sincere’, have a bold vision and not brazen.
Doesn't everyone need time to learn to walk and then run?
It is with such outlook that I have invested in $Rigetti Computing(RGTI)$, $Lumen Technologies(LUMN)$ and even Lottery (LTRY)$.
Now, I am looking at cyber security stock - $SentinelOne, Inc(S)$.
I have ‘missed’ the boat earlier on when it suddenly skyrocketed out of the blue in mid Feb 2024 and even as recent as 04 Dec 2024. (see below)
I did not give chase because I believe opportunity would presents itself again. I think it is now !
How So ?
Shares of SentinelOne tumbled after the company reported its Q3 2025 earnings on Thu, 05 Dec 2024.
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Revenue: came in at $210.6 million. This is a +28% YoY gain vs $164.2 million. (Q3 2024) vs Wall Street expectations of $209.75 million.
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Loss per share: was -$0.25. This is a -4.17% YoY negative gain vs -$0.24 (Q3 2024).
Despite the cybersecurity company (i) topping revenue estimates and (ii) increasing its guidance, stock price fell. (see below)
The drop pushed the stock into negative territory YTD at -13.30% as of Fri, 20 Dec 2024.
Earnings Deep Dive.
In addition to total revenue and loss per share, shared earlier on (see above), below are other pertinent information / factors on SentinelOne’s financial health.
(1) Annual recurring revenue (ARR).
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ARR has climbed by +29% to $859.7 million.
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For the quarter, it has added (new) net ARR of $54 million.
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At the same time, the number of customers with ARR (valued at $100,000 or more) grew by +24.0% to 1,310 subscribers.
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ARR are important numbers because they are like a predictable income stream that SentinelOne can rely on.
[Side track] - What is ARR ? It is the Annualized value of its customer subscription & consumption-based contracts
(2) Gross Margin.
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Rose to 75%, up +2.0% YoY from 73% (Q3 2024).
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Adjusted gross margin (excluding stock-based compensation), increased marginally to 80% from 79%.
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Improvement is due to better efficiency, larger scale, and more customers using the company's platform
(3) Cash Flow / Free Cash Flow.
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Operating cash flow came in at -$7 million.
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Free Cash Flow (FCF): was -$12.65 million. That is a +52% YoY ‘gain’ vs -$26.375 million (Q3 2024).
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Trailing 12 month (TTM) FCF : Is positive with about $1.1 billion in net cash and short- and long-term investments and no debt.
(4) Loss Per Share.
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Earnings / Loss per share is a factor that investors might have been disappointed about.
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Non-GAAP loss per share (diluted): was $0.00 per share vs analysts’ consensus of $0.01 per share vs -$0.03 per share (Q3 2024).
(5) Purple AI Solution.
What is it ?
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It SentinelOne’s AI security analyst solution / app that helps users detect, investigate, & respond to threats faster.
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Accordingly, it is a growth driver, that has seen rapid adoption to become one of the fastest-growing solutions in company's history.
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Attach rate for the solution has doubled, compared to Q2 2025.
Guidance / Outlook Deep Dive.
(1) Guidance.
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Projected Q4 2025 revenue to be approx. $222 million vs analysts’ consensus of $220.6 million.
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This would be a +27.0% YoY gain.
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Adjusted gross margin is expected to be 79%.
(2) Outlook.
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It is still taking advantage of $CrowdStrike Holdings, Inc.(CRWD)$ 19 Jul 2024 - IT outage.
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SentinelOne have converted more customers compared to its closest competitor.
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That included a Fortune 50 company and several government agencies.
My viewpoints: (mine only)
I feel, SentinelOne has delivered a strong quarter, with an upbeat guidance that are exceeding analyst expectations.
Yet, investors are expecting even more.
The company remains undervalued compared to its peers (on a price-to-sale P/S basis).
Even though it is growing revenue at a similar pace to CrowdStrike (29% in Q2) and significantly faster than $Palo Alto Networks(PANW)$ (14% in Q2), its stock price is much lower — only about 7% of CrowdStrike's price and 6% of Palo Alto's.
In September 2024, it was announced that Lenovo will provide millions of PCs and other endpoints with SentinelOne protection. (see above)
The new partnership will run for several years.
Millions of Lenovo’s PCs will have SentinelOne’s Singularity Platform pre-installed:
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This includes Purple AI, the suite of AI capabilities that provide protection, on top of Lenovo’s ThinkShield technology.
While the full impact would not be felt until H2 2025, it is a significant step for SentinelOne, considering Lenovo is the world's largest enterprise PC vendor.
In the same September month, SentinelOne achieved Federal Risk and Authorization Management Program (FedRAMP) authorization at the High Impact Level for its products - Singularity Platform & Singularity Data Lake. (see above)
The certification validates the strength of SentinelOne's AI-powered security solutions in protecting sensitive government data against cyber-attacks.
With the certification, SentinelOne could focus on expanding its presence in the federal government sector.
In October 2024, SentinelOne announced an extension of its strategic collaboration agreement with Amazon Web Services (AWS) to enhance their AI-driven cybersecurity solutions. (see above)
The collaboration will see SentinelOne's Purple AI cybersecurity analyst harness the capabilities of Amazon Bedrock, to provide AI-powered security and protection for clients.
The agreement also involves augmenting investments in SentinelOne's AI-enabled Singularity Platform within the AWS Marketplace, facilitating accessible end-to-end security for businesses.
SentinelOne’s suite of quality cybersecurity products is ready to protect government agencies and commercial enterprises. Are they ready for SentinelOne ?
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Do you think SentinelOne will gain wider acceptance heading into 2025 ?
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Do you think SentinelOne will be able to carve out a path for itself in the Cybersecurity realm ?
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