SentinelOne Downgraded to Hold Amid Weak Guidance and Profitability Challenges

In a report released today, Tal Liani from Bank of America Securities downgraded SentinelOne (S – Research Report) to a Hold, with a price target of $21.00.

Tal Liani has given his Hold rating due to a combination of factors impacting SentinelOne’s performance. Despite reporting a quarter with revenue growth slightly above expectations, the company’s annual recurring revenue did not meet forecasts, and its guidance was weak. SentinelOne has been facing challenges with two consecutive quarters of reduced guidance, and its growth rate is similar to that of larger competitors like CrowdStrike, but with significantly lower profitability. The stock has also underperformed compared to the NASDAQ index, leading to a downgrade from a Buy to a Neutral rating and a reduced price objective.
In addition, SentinelOne’s business trends have shown signs of weakness, with declining net new annual recurring revenue and a slight drop in net revenue retention, indicating difficulties in upselling. The company’s profitability margins are lower than its peers, partly due to its focus on smaller customers and managed service providers. While the endpoint market remains attractive and SentinelOne benefits from positive market trends, the stock’s low valuation reflects existing risks, and it currently lacks significant upside catalysts.

According to TipRanks, Liani is a 5-star analyst with an average return of 10.1% and a 57.44% success rate. Liani covers the Technology sector, focusing on stocks such as Check Point, Cisco Systems, and Palo Alto Networks.

In another report released today, Morgan Stanley also maintained a Hold rating on the stock with a $18.00 price target.