10) SentinelOne, Inc. (NYSE:S)
Number of Hedge Fund Holders: 37
Average Upside Potential: 37.3%
SentinelOne, Inc. (NYSE:S) is an AI-driven cybersecurity firm leveraging AI and ML to offer advanced endpoint protection, threat detection, and response solutions. The company’s strategic focus on AI-driven security and expansion into cloud-native solutions places it well with current market trends. With organizations adopting cloud computing and facing sophisticated cyber threats, the demand for advanced, AI-powered security solutions is anticipated to grow. SentinelOne, Inc. (NYSE:S)’s investments in areas like Purple AI and Cloud Native Security place it well to capitalize on these trends.
The success of such initiatives is expected to diversify the company’s revenue streams and create higher-margin business opportunities. If SentinelOne, Inc. (NYSE:S) establishes itself as a leader in AI-driven cloud security, it can fuel sustainable long-term growth and achieve a competitive edge against both traditional security vendors and cloud-native challengers. SentinelOne, Inc. (NYSE:S)’s ability to address increased demand for AI-driven data management solutions and facilitate cloud migrations for large enterprises places it well in the dynamic environment.
Since organizations have been adopting AI across industries, the complexity and volume of cyber threats targeting AI systems and other digital assets have been increasing. SentinelOne, Inc. (NYSE:S)’s AI-powered Singularity platform remains well-placed to address this demand with advanced features. 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.”