Shares of cybersecurity firm SentinelOne (S) jumped as much as 18% on Monday after reports suggested that rival Palo Alto Networks (PANW) might be in advanced talks to buy the company. Although Palo Alto told CNBC that the rumor isn’t true, the speculation came from Israeli news outlets Calcalist and Globes, which claimed that the two companies were discussing a deal potentially worth $7 billion to $10 billion.
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Interestingly, SentinelOne was founded in 2013 by Israeli entrepreneur Tomer Weingarten and went public in 2021 at a $9 billion valuation, the largest cybersecurity IPO ever at the time. However, the stock has fallen by 57% since the IPO and has underperformed major indices like the Nasdaq (QQQ) and S&P 500 (SPY). In addition, the company recently lowered its full-year revenue forecast to between $996 million and $1 billion, below earlier projections and slightly under Wall Street estimates.
For Palo Alto Networks, which is worth over $130 billion, buying SentinelOne would be its largest acquisition in years and could help it compete more directly with rivals like CrowdStrike (CRWD) in endpoint security. Although Palo Alto hasn’t confirmed any deal, it’s known for making strategic acquisitions. Indeed, just three months ago, it bought Protect AI to strengthen its defense capabilities in artificial intelligence, which is a growing area of focus. Nevertheless, if Palo Alto were to acquire SentinelOne, it would be a major move that would solidify its leadership in the cybersecurity space.
Which Cybersecurity Stock Is the Better Buy?
Turning to Wall Street, analysts think that SentinelOne stock has more room to run than Palo Alto. In fact, SentinelOne’s price target of $22.96 per share implies almost 16% upside versus Palo Alto’s 8.6%.
