Cybersecurity Stock SentinelOne Has Path To Profitability Over Next Two Years, Analysts Say

Barclays analyst Saket Kalia reiterated an Equal-Weight on SentinelOne Inc S and reduced the price target from $20 to $18.
SentinelOne missed 3Q23 net new ARR by ~$9 million, lowered 4Q23 net new to ~$59 million, and guided FY24 to 50% base ARR growth.
Kalia highlighted that Microsoft Corp MSFT Defender did not sound like an incremental threat, and excluding Attivo, the analyst came to 25%+ organic net new ARR growth implied in FY24.
Wells Fargo analyst Andrew Nowinski maintained an Overweight and cut the price target from $23 to $18.
SentinelOne reported Q3 revenue exceeding the high-end guidance, which is in line with the average beat over the previous four quarters.
However, Total ARR missed expectations, as net new ARR only increased 26% Y/Y.
Management attributed the miss to longer sales cycles on large deals and FX headwinds.
Management now expects the FY25 operating margin to break-even, suggesting the company has a path to profitability over the next two years.
FCF flow should reach break-even in FY24. The analyst's target multiple is a premium to the peer group average, which he believes is justified given higher long-term growth assumptions.
Needham analyst Alex Henderson maintained a Buy and lowered the price target from $28 to $19.
Sentinel pretty much followed the drill set out by previous Security prints.
They noted elongating selling cycles, particularly on more critical deals, and reported slower growth in EMEA due to the FX reduction in the "purchasing power" of the customers.
They pointed to several deals sliding out of the quarter as a result and noted they were taking actions to improve profitability even as growth slowed on macro pressures.
Sentinel stated they continue to have a strong, and in fact, record pipeline and delivered a healthy DBNR of 134%.
As the analyst had speculated in the print, investors seem to prefer slower growth with more sharply improving Margins.
Price Action: S shares traded higher by 1.77% at $14.34 on the last check Wednesday.

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