Why SentinelOne (S) Stock Is Trading Up Today
What Happened:
Shares of cyber security company SentinelOne (NYSE:S) jumped 5.2% in the morning session after BTIG analyst Gray Powell upgraded the stock's rating from Neutral to Buy and assigned a price target of $30, citing "an increase in cyberattacks." The new price target implied a potential 10% upside when the upgrade was announced. He added, "With sales execution improving in recent quarters and a more favorable spending outlook, we now have a higher degree of confidence in S's ability to meet or exceed street estimates going forward."
Separately, major indices continued to rise after the S&P made an all-time high on Friday, 19 January 2024, above the previous highs set in January 2022. Tech stocks have outperformed since the second half of 2023 with expectations that the Fed will cut rates in 2024. Other than continued momentum from this dynamic, we haven't observed any other specific macro or economic developments to explain the market strength.
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What is the market telling us:
SentinelOne's shares are quite volatile and over the last year have had 30 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago, when the stock dropped 34.9% on the news that the company reported first-quarter results that missed analysts' revenue estimates. Earnings per share (EPS) beat. However, the company continued to burn cash. Guidance was also weak. Revenue guidance for the next quarter was below Consensus. Full year guidance revenue was lowered and also came in below expectations. Lowering guidance is always a worrisome sign, and the company reducing full year revenue guidance by more than 6% is also a meaningful magnitude. Additionally, operating margin guidance was maintained on the lower revenues; it would have been much more comforting had margins increased, showing that the company was perhaps prioritizing profits and efficiency over growth at all costs. Management called out a difficult macro backdrop and acknowledged that the quarter was a "tough" one. The overall results and commentary were weak, with the topline miss and underwhelming guidance providing little reason to be optimistic.
SentinelOne is up 1.4% since the beginning of the year, and at $26.24 per share it is trading close to its 52-week high of $27.88 from December 2023. Investors who bought $1,000 worth of SentinelOne's shares at the IPO in June 2021 would now be looking at an investment worth $617.24.
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