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2024 looks set to be the year of the haves and have-nots in the cybersecurity industry. Larger firms tend to get bigger, while smaller ones tend to lose value. Among eight large-cap cybersecurity companies, including Palo Alto Networks NASDAQ:PANVthe average return in 2024 will be 27% at the close on December 10th. Meanwhile, the group of four small- and mid-cap companies that includes SentinelOne New York Stock Exchange:Cshares fell an average of 17%.

So, can the smaller SentinelOne turn things around in 2025 after falling 13% in 2024? I’ll tell you exactly where SentinelOne fits into the cybersecurity industry. I’ll provide an overview of the company’s financial trends and its struggles with a key competitor, as well as my overall opinion of SentinelOne.

Endpoint Security is the middle name of SentinelOne

SentinelOne today

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SentinelOne

$24.02 +0.45 (+1.91%)

(As of December 12, 2024 ET)

52 week range

$14.33

▼

$30.76

Target price

$29.42

SentinelOne primarily operates in three key parts of the cybersecurity ecosystem. These are endpoint, cloud and identity. Endpoint security protects individual devices such as cell phones and laptops using stored data. The cloud means securing the environments in which organizations store data. Users access data remotely through end devices. Protecting personal data means preventing unauthorized users from obtaining credentials. They can use them to log into the application with sensitive data. All of these areas serve as different entry points that attackers can use to launch cyberattacks. Therefore, it is important to ensure their protection.

The company operates its business through its Singularity platform, which combines protection against all three vectors and uses artificial intelligence to detect and respond to cyber threats. However, SentinelOne specializes in endpoint security with its Singularity Endpoint product. SentinelOne’s attention has led to partnerships with other cybersecurity firms. Users can combine them according to their needs. SentinelOne’s Focus on Endpoint Security Makes CrowdStrike NASDAQ: CRWD and Microsoft NASDAQ: MSFT its main competitors.

SentinelOne is growing rapidly, with growth of more than 30% in recent quarters excluding the last. The company has also continuously improved its profitability, increasing profits over time. Last quarter, adjusted operating margin increased six basis points year over year to -5%.

In addition, for the first time in the company’s history, it achieved positive free cash flow over the last twelve months. However, it’s not ideal to see the company’s year-over-year revenue growth rate essentially match CrowdStrike’s performance over the last two quarters. CrowdStrike’s total revenue is nearly five times that of SentinelOne.

Could a CrowdStrike crash cause a SentinelOne match?

One of the main hopes for SentinelOne bulls is that the company will be able to benefit from the highly publicized CrowdStrike outage. There is evidence that this is happening. CEO Tomer Weingarten said in its latest earnings report that the company has a “record pipeline.” In the third quarter, it had a “record number of wins over its closest competitor,” most likely CrowdStrike.

At the same time, the impact on the company’s financial performance will not be immediate. CrowdStrike’s failure occurred on July 19, so by the end of the company’s third quarter on October 31, it had only about three months to capture any resulting business. While third-quarter earnings released Dec. 4 showed sales up 28%, that growth was lower than previous quarters.

However, cybersecurity systems are fragile and complex, making it difficult to switch vendors quickly. As such, observers should give SentinelOne more time to prove that it can actually take advantage of CrowdStrike’s outage. However, the last quarter saw accelerated growth in the endpoint and new business segments.

The company said customers are very focused on saving money next year. The company’s industry-leading adjusted gross margin of 80% could give it an advantage here. He may have more leeway to compromise on price while maintaining high profits.

SentinelOne: The future is promising, but the near term is uncertain

I view SentinelOne as a company on a strong, long-term path. There is little indication that the firm will not be able to achieve its profitability target in the near future. He has made consistent progress towards this goal. However, the comment about customer cost savings indicates an overall slowdown in the cybersecurity market.

Some indicators indicate that SentinelOne may be significantly undervalued compared to CrowdStrike. Its forward price-to-sales ratio is less than half that of CrowdStrike. However, new evidence that SentinelOne is taking business away from CrowdStrike is warranted. By the next quarter, it should be much clearer whether the company benefited from the CrowdStrike outage.

Before you consider SentinelOne, you’ll want to hear this.

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