SentinelOne Posts Q2 Beat, 6 Analysts Cite Benefits Of CrowdStrike Customer Churn: 'Outage Was A Net Positive'

Shares of SentinelOne Inc S were in the red in early trading on Wednesday, after the company reported mixed fiscal second-quarter results.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• DA Davidson analyst Rudy Kessinger reiterated a Neutral rating, while raising the price target from $18.50 to $23.
• Scotiabank analyst Patrick Colville maintained a Sector Perform rating, while lifting the price target from $18 to $25.
• Needham analyst Alex Henderson reaffirmed a Buy rating and price target of $29.
• WestPark Captial analyst Casey Ryan reiterated a Buy rating and price target of $34.
• JMP Securities analyst Trevor Walsh maintained a Market Outperform rating and price of $33.
• KeyBanc Capital Markets analyst Eric Heath reaffirmed a Sector Weight rating on the stock.

Check out other analyst stock ratings.

DA Davidson: SentinelOne missed expectations in the fiscal first quarter. However, the company delivered a solid beat and raised its full-year guidance, Kessinger said in a note. Revenues and earnings came in at $198.9 million and 1 cent per share, beating consensus of $197.4 million and breakeven, respectively.

Management raised their full-year revenue guidance to $815 million, coming in higher than the current consensus of $813.7 million. Some customers shifted to SentinelOne after the outage at CrowdStrike Holdings Inc CRWD, but others “are not going to make a change quickly.”

Scotiabank: While SentinelOne's new ARR (annual recurring revenue) declined year-on-year in the fiscal second quarter, the focus is on management's forward commentary, Colville said. "Management believes that the CrowdStrike outage is a net positive for the company, highlighting that customers and partners are considering SentinelOne in more deals, with win rates already improving," he wrote.

Management noted, however, that CrowdStrike customers "have no pressure to act," the analyst stated. SentinelOne is "barely tweaking its top-line guidance – a tad disappointing vs. expectations," he added.

Needham: Although the company delivered solid quarterly results and its guidance was "incrementally better," the pressure on the stock is "likely more a reflection of the commentary and tone from the call," Henderson said.

"Management noted even before Crowd’s issues, Sentinel was seeing improving pipeline growth and retention, strong uptake of Purple AI, Data Lake and other emerging solutions, improving channel and partner trends, and strong Fed demand," the analyst wrote. SentinelOne is a quarter the size of CrowdStrike, "so any business moving over could have a disproportionate impact," he added.

WestPark Capital: SentinelOne's quarterly results were strong and exceeded expectations, Ryan said. Revenues grew by 33% year-on-year, while ARR climbed 32% and large customers were up 24%, he added.

SentinelOne offered positive guidance for the fiscal third quarter and raised its full-year revenue guidance, the analyst stated. "Raising guidance is always positive, however, we had hoped that a solid 2Q would be catalyst for a larger guidance increase in light of the competitive window allowed by CrowdStrike’s problems with customers in 2H calendar 2024," he added.

JMP Securities: "The single most anticipated topic heading into SentinelOne's F2Q25 earnings call was the impact of the global IT outage caused by primary competitor CrowdStrike on July 19, 2024 (almost two weeks before SentinelOne's second-quarter end)," Walsh wrote in a note.

CEO Tomer Weingarten adopted a "more hardline approach" and used the incident to "reinforce key differentiators of SentinelOne’s architecture," the analyst stated. "These are the type of arguments we believe will resonate more with security professionals," he added.

KeyBanc Capital Markets: SentinelOne delivered a solid ARR beat, which "management attributed to organic momentum in the business, without any material benefit in the quarter from the CrowdStrike outage," Heath said. He added, however, that management noted some customers had already migrated off CrowdStrike to SentinelOne, some were in the process of shifting and some that will take time.

"FY25 revenue guide was raised to the high end of the prior range and does not depend on any benefits from CrowdStrike displacements," the analyst wrote. While SentinelOne is a beneficiary of CrowdStrike's customer churn, "we do retain some caution on the degree of CrowdStrike displacement opportunity and the ability to deliver continued strong growth alongside meaningful margin improvement amid a still highly competitive endpoint market," he further wrote.

S Price Action: Shares of SentinelOne had declined by 1.29% to $24.43 at the time of publication on Wednesday.

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