SentinelOne, Inc. Reports Upbeat Q4 Results & Accretive Acquisition of Attivo

SentinelOne, Inc. (NYSE: S) shares gained 4.5% on March 15, after it announced the accretive acquisition of Attivo Networks for $616.5M.

However, shares of the autonomous cybersecurity platform company lost over 5% during the extended trading session despite reporting stronger-than-expected fourth-quarter results and an upbeat FY2023 outlook ahead of Street expectations.

Strength of the company’s XDR platform and robust innovation and execution drove the quarterly beat.

Q4 Beat

The company reported an adjusted loss of $0.17 per share, which was a cent ahead of the street’s estimated loss of $0.18. Notably, it was a significant improvement over the previous year’s loss of $0.84 per share.

Markedly, revenues jumped 120% year-over-year to $65.6 million and exceeded consensus estimates of $60.65 million.

The increase in revenues reflects a surge in annualized recurring revenue (ARR), which increased a whopping 123% to $292 million driven by strong momentum from new as well as existing large enterprises.

Similarly, adjusted gross margin improved 1200 bps to 66%, compared to 54% for the prior-year quarter.

SentinelOne to Acquire Attivo Networks for $616.5M

Prior to the earnings release, SentinelOne inked a deal to acquire Attivo Networks to bolster its AI-powered prevention, detection, and response capabilities, in a cash-cum-stock deal worth $616.5 million.

Based in Bangalore, India, Attivo Networks is a leading identity security and lateral movement protection company. The acquisition will add the leading Identity Threat Detection and Response (ITDR) technology, thereby setting the standard for XDR and accelerating enterprise zero trust adoption.

Notably, it will expand SentinelOne’s total addressable market (TAM) by $4 billion in the potentially-growing critical identity security segment.

Likewise, the deal will highly boost SentinelOne’s hyper-growth and is expected to be accretive to its GAAP and non-GAAP gross margin. The acquisition is expected to close in the fiscal second quarter, subject to certain regulatory approvals.

Upbeat FY2023 Outlook

Looking ahead, management provided financial guidance for FY2023, which excludes the impact from the Attivo Networks acquisition.

For FY2023, revenues are forecast to be in the range of $366 million to $370 million, ahead of the consensus estimate of $346.2 million.

For the first quarter, revenues are projected to be in the range of $74 million to $75 million, higher than the consensus estimate of $68.2 million.

CEO Comments

Regarding the announced acquisition, SentinelOne CEO, Tomer Weingarten, commented, “The acquisition of Attivo Networks continues our commitment to defining and delivering autonomous XDR.”

He further added, “Identity fuses together all enterprise assets, and I see identity threat detection and response as an integral part of our XDR vision. Attivo Networks is the right technology and team to advance our portfolio, complementing our hypergrowth and accelerating enterprise zero trust adoption.”

Wall Street’s Take

Following the Q4 results, JMP Securities analyst Trevor J. Walsh reiterated a Buy rating on the stock with a price target of $65 (110.4% upside potential).

Turning to Wall Street, the analyst consensus is, however, cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 8 Buys and 3 Holds. The average SentinelOne stock forecast of $53.55 indicates an upside potential of 73.36%.

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