7) SentinelOne, Inc. (NYSE:S)
Average Upside Potential: ~29.2%
Number of Hedge Fund Holders: 37
SentinelOne, Inc. (NYSE:S) is an Al-driven cybersecurity firm, and it leverages artificial intelligence and machine learning to detect, prevent and respond to cyber threats. Oppenheimer initiated coverage on the company’s shares with an “Outperform” rating, giving a price target of $32.00. The firm’s analysts showcased optimism regarding SentinelOne, Inc. (NYSE:S)’s prospects, highlighting a significantly improved leadership team, which resulted in better operational execution and a transformation in sales and go-to-market strategies.
Elsewhere, Cantor Fitzgerald, a research firm, gave an “Overweight” rating on the company’s shares with a price target of $30.00. The research firm expressed its confidence in the company’s trajectory, highlighting its continued investment in emerging solutions such as Purple Al, Cloud Native Security, and Singularity Data Lake. SentinelOne, Inc. (NYSE:S) is well-placed to capitalize on the displacement of legacy security products with companies seeking more advanced, Al-driven solutions. While the company operates in a competitive industry, SentinelOne, Inc. (NYSE:S)’s unique system architecture and Al-driven approach continue to act as key differentiators.
Baron Funds, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“We are huge believers in the practical uses of AI, and we have several investments in companies that adapt AI models to enhance their products and services. These include companies like GitLab Inc., Sentinelone Inc. (NYSE:S), and Couchbase, Inc., which were among our top detractors at one point in the second quarter (GitLab and SentinelOne recovered significantly in the last week of the quarter). As of the second quarter at least, the market has just not been ready to reward AI companies beyond those providing “picks and shovels.” This led to all three of these companies trading at or near all-time low valuation levels during the quarter. Nevertheless, we believe that in the coming quarters the market will broaden its level of interest from AI hardware to “adaptive AI” investments like GitLab, SentinelOne, and Couchbase. In that scenario, all three of these stocks have significant upside potential.
GitLab is a subscription software company that enables enterprise software developers to develop new software applications rapidly and securely for their firms. GitLab uses AI to help with code suggestions, to check for holes in security, and to automate collaboration among the many developers within an enterprise. GitLab recently launched a product called Duo that we believe will provide revenue upside for the company and enhance the competitiveness of their product of offerings. SentinelOne is a cybersecurity company that provides endpoint protection (a much more advanced version of legacy “anti-virus” software) both at customers’ physical sites and in the cloud. It uses AI to detect anomalous behavior on the network and to automate the remediation of the security flaws that led to the intrusion. Both companies are recurring revenue entities, with high gross margins (78% for SentinelOne and 90% for GitLab) and are growing rapidly (revenue growth of 25% or more). Yet both are trading at or near all-time low valuation levels. SentinelOne slightly beat full-year revenue guidance but guided to an operating loss that was $7.5 million worse than consensus (entirely accounted for by the increased operating expense pulled in from acquisitions – including PingSafe which allows SentinelOne to scan cloud-based workloads without the need to install a software agent). This led to a one-day stock drop of as much as 31% which we attribute purely to market skittishness. By quarter end, SentinelOne’s shares had fully recovered. We believe the company can grow revenues by 25% from 2024 through 2028 and that free cash flow will go up over 10-fold in this period. We see the stock at least doubling from its current price.”
