What Happened:

Shares of cyber security company SentinelOne (NYSE:S) fell 16.7% in the morning session after the company reported fourth-quarter results and provided revenue guidance for the upcoming year, which came in below expectations, suggesting a slowdown in demand amidst an intense competitive landscape with cybersecurity peers like CrowdStrike. In addition, its net revenue retention rate of 115% missed estimates of 118%. That means its existing customers bought fewer products, and the company is more dependent on new customers (expensive to acquire) to generate growth. Guidance was also underwhelming, with the revenue projections for the next quarter and full year roughly in line with expectations. Overall, this was a tough quarter for SentinelOne.

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What is the market telling us:

SentinelOne's shares are quite volatile and over the last year have had 28 moves greater than 5%. But moves this big are very rare even for SentinelOne and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move we wrote about was 8 days ago, when the company gained 10.8% on the news that peer, CrowdStrike reported fourth-quarter results with revenue and ARR (annual recurring revenue) beating by a slight margin but very convincingly on operating profit. Keeping with that theme, while forward guidance for the next quarter and the full year were only slightly above expectations, non-GAAP EPS guidance was more convincingly ahead, showing better-than-expected profitability. 

Lastly, Palo Alto Networks (NASDAQ:PANW) warned of weakness in security spending a few weeks ago when it reported earnings, sending waves of caution across the sector. Cybersecurity peers that reported after Palo Alto put up mixed results, which kept investors on edge for CrowdStrike's results.

SentinelOne is down 9.7% since the beginning of the year, and at $23.37 per share it is trading 22.1% below its 52-week high of $30 from February 2024. Investors who bought $1,000 worth of SentinelOne's shares at the IPO in June 2021 would now be looking at an investment worth $549.60.

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