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Will Sentinelone Stock Break Out In 2025?
The cybersecurity field is a lucrative but crowded industry. Fortune Business Insights forecasts this industry will expand at a compound annual growth rate (CAGR) of 14% through 2032. This could mean the rapid growth lifts all industry stocks over time.
Unfortunately for investors, it is also a crowded and highly competitive field. With numerous emerging companies and established tech giants offering cybersecurity solutions, it could put considerable pressure on cybersecurity stocks over time.
However, SentinelOne (NYSE: S) appears to hold an advantage in artificial intelligence (AI)-driven cybersecurity products, which could provide an opportunity many investors seem to have overlooked.
The SentinelOne difference
SentinelOne stands out for its AI-driven cybersecurity applications. Indeed, its Singularity platform offers what it describes as "best-in-class security." It combines functions such as ingesting data, supporting threat intelligence, and running its automation capabilities. Also, the ability to track security threats makes attacks easier to investigate.
Nonetheless, the part of Singularity that has drawn considerable attention is Purple AI. Purple AI works within Singularity to automate security alert triage, threat detection, and investigations, effectively simplifying the platform's security operations.
Additionally, the ability to understand natural language makes it easier to use. Such features have made it one of the fastest-growing solutions in the company's history.
Its approach has also won SentinelOne accolades across its industry. Gartner recognizes the cybersecurity company as a leader in its "Magic Quadrant" for endpoint protection, while CRN declared Singularity its cloud security product of the year.
Moreover, while it no longer publishes overall customer numbers, the number of clients who spend at least $100,000 annually on the platform grew 24% to 1,310, and the number spending $1 million or more is at a record high. Since organizations prefer to avoid the disruption that comes with switching cybersecurity providers, such growth bodes well for SentinelOne and its investors.
SentinelOne's financials
SentinelOne's financials appear to reflect customer growth. Revenue for the first nine months of fiscal 2025 (ended Oct. 31) was $596 million, a year-over-year gain of 33%. Furthermore, it limited the growth in operating expenses over the same period to 13%.
Unfortunately, that was not enough to cover its operating expenses. Consequently, the company lost $218 million in the first three quarters of fiscal 2025. While that was up from $267 million in the same year-ago period, it shows that SentinelOne is unlikely to become profitable in the foreseeable future.
The company forecasts 32% revenue growth for fiscal 2025. However, analysts think it could slow to 26% in 2026. Although that growth rate far exceeds the forecast industry CAGR, investors often sell stocks when revenue growth rates slow. That could bode poorly for investors hoping to capitalize on this opportunity.
For now, SentinelOne has delivered a mixed stock performance. It has risen more than 60% since reaching its all-time low at the end of 2022. Still, it has gained little traction this year, and its direction over the next year is uncertain.
However, its valuation could draw investors into the stock. Because SentinelOne is a money-losing company, its P/E ratio is not applicable. Still, its price-to-sales (P/S) ratio of 9.6 is lower than that of every major cybersecurity stock except for Okta and Check Point Software. This differential and comparatively low sales multiple could make it an attractive choice as more customers take to its AI-driven tools.
S PS Ratio data by YCharts
Is 2025 the year for SentinelOne?
The near-term path for SentinelOne stock remains uncertain, but the growing appeal of its AI-driven security software could bode well for the company. The emphasis on AI has led to significant customer growth, particularly with its largest customers, and that has significantly boosted its financials.
Admittedly, SentinelOne has numerous competitors, and the slowdown in revenue growth and ongoing losses could become more of a concern. Nonetheless, revenue levels should continue to increase significantly, and given its comparatively low valuation, its stock stands a high probability of outperforming the market long-term.
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Will Healy has positions in CrowdStrike and Zscaler. The Motley Fool has positions in and recommends Check Point Software Technologies, CrowdStrike, Fortinet, Okta, and Zscaler. The Motley Fool recommends Gartner and Palo Alto Networks. The Motley Fool has a disclosure policy.
