In this digital age, where threats are becoming more relentless, businesses are looking for innovative ways to protect their digital assets. The rise of artificial intelligence (AI) has enabled cybersecurity firms to provide advanced and real-time solutions to cyber threats.

Cybersecurity firm SentinelOne (S) is providing these solutions by utilizing AI to defend against cyber threats. Its revenue has increased rapidly, from $46.5 million in fiscal 2020 to $621. 2 million in fiscal 2024. The global cybersecurity market is estimated to grow at a compounded annual growth rate of 9.4% to $298.5 billion by 2028. While competition in this space is fierce, SentinelOne remains well-positioned to capitalize on this growth.

SentinelOne stock is down 21% year-to-date, compared to the S&P 500 Index’s ($SPX)gain of 8.1%. Nonetheless, Wall Street expects the stock to soar close to 38% from current levels. Let’s find out why.

SentinelOne’s Track Record Is Impressive

SentinelOne's financial performance has been boosted by increased demand for its AI-powered endpoint security solutions. An important metric to check while gauging SentinelOne’s investment case is its annual recurring revenue (ARR), which measures a company's ability to acquire new customers while retaining existing ones. In the fourth quarter of fiscal 2024, ARR jumped 39% to $724.4 million. Plus, customers with an ARR of $100,000 or more increased by 30% to 1,133.

Furthermore, the company’s net retention rate (NRR) stood at 115%. Total revenue in Q4 surged 38% to $174.2 million. In fiscal 2024, revenue increased 47% to $621.2 million.

Despite its rapid revenue growth, SentinelOne is still not profitable. However, its losses shrank to $71.9 million in the quarter, down from $93.7 million in the same period last year. 

While the company had a negative free cash flow balance of $10.6 billion, its balance sheet remained strong. At the quarter's end, cash, cash equivalents, and investments totaled $1.1 billion.

In February, the company completed the acquisition of cloud security company PingSafe. SentinelOne, in collaboration with PingSafe's cloud-native application protection platform (CNAPP), aims to build a "unified security platform that protects the entire enterprise."

Management expects first-quarter revenue to increase by 36% to $181 million. For the full year, revenue is expected to jump by around 31% to range between $812 million to $818 million.

For the full year, analysts forecast a 31.6% increase in revenue to $817 million, followed by 28% growth in 2026. Since the company is still unprofitable, we will look at its forward price-to-sales ratio for valuation purposes. Trading at eight times forward 2025 estimated sales, SentinelOne seems reasonably valued now. For comparison, peer Crowdstrike (CRWD) is trading at 18 times forward sales for a 30% revenue increase expected by 2025.

What Does Wall Street Say About SentinelOne Stock?

Following SentinelOne's Q4 results, many analysts stuck to their “buy” and “hold” rating for the stock. Most analysts are impressed by the company's rapid revenue growth, but are wary of the fierce competition in the cybersecurity space.

In March, Jefferies (JEF) analyst Joseph Gallo maintained his "hold" rating and price target of $28. Gallo believes the stock is fairly valued in comparison to its peers, such as Microsoft (MSFT) and Crowdstrike, and that its long-term prospects remain favorable. Likewise, Barclays assigned the stock a "hold" rating with a target price of $27. 

Similarly, Goldman Sachs(GS) analyst Gabriela Borges maintained a “neutral” stance on the stock. According to Borges, "SentinelOne's comprehensive cloud technology portfolio, which now includes both agent-based and agentless technologies, is seen as a competitive strength, particularly its agent-based technology."

Although Borges is impressed with SentinelOne’s Q4 performance and fiscal 2025 guidance, he believes the company's long-term growth prospects in a highly competitive market remain uncertain.

On the other hand, JMP Securities’ analyst Trevor J. Walsh maintained his “buy” rating with a target price of $33.

Overall, analysts rate SentinelOne stock as a “moderate buy.” Of the 27 analysts covering S stock, 15 rate it as a "strong buy," one has a "moderate buy," and 11 suggest it is a "hold." 

 The average price target for S is $29.28, 35.6% higher than current levels. Furthermore, its high target price of $37 implies a potential 71.4% gain over the next 12 months.

The Bottom Line on SentinelOne Stock

Looking ahead, SentinelOne is well-positioned to capitalize on the growing demand for advanced cybersecurity solutions. The company's robust revenue growth, narrowing losses, healthy balance sheet, and reasonable valuation make it a compelling investment case. 

However, due to stiff competition, the stock remains risky until it becomes profitable. As a result, I agree with Wall Street and maintain a neutral stance on SentinelOne stock for now.