SentinelOne(NYSE: S) went public with a bang in 2021. After listing at $35 per share, it more than doubled to a record high of $78.50 within just a few months. Unfortunately, its valuation was completely unsustainable at that price (more on that later), and the stock proceeded to decline by 82%.
SentinelOne stock has recovered from its low point, but it remains around 70% below its record high. I think it will make up more ground in 2025 because the company is a leading provider of cybersecurity software that is powered by artificial intelligence (AI).
According to Cybersecurity Ventures, cybercrime is projected to cause $10.5 trillion worth of damage to the global economy this year, which is likely to trigger record demand for advanced protection. That could be a significant tailwind for SentinelOne, and it's part of why now might be a good time to buy its stock on the dip.
AI is transforming cybersecurity
SentinelOne believes machines can respond to incidents faster than humans, which is important because cyberattacks are becoming significantly more frequent. Zscaler recently said spyware attacks have doubled over the past year, and in mid-2024, Palo Alto Networks observed a tenfold increase in email phishing attacks compared to the same period in 2023.
SentinelOne's Singularity platform is an all-in-one solution for protecting cloud networks, employee identities, and endpoints (computers and devices), and it relies on AI to automate as much of the process as possible. In December, the company announced that it set the standard once again in the 2024 MITRE ATT&CK Evaluations, which measure a cybersecurity vendor's ability to protect against a wide range of threats.
The Singularity platform achieved 100% detection accuracy by identifying each and every threat. It also had zero detection delays, meaning it spotted threats in real-time so they could be instantly neutralized. Finally, the platform generated 88% fewer signals than the median result among its competitors, which means it produced fewer alerts that required human attention.
Alert fatigue has become a huge issue across the industry as human managers struggle to keep up with the growing volume of cyberattacks (some enterprises receive over 1,000 alerts every day), so Singularity uses AI-powered tools to help ease the burden. Its Storyline feature autonomously tracks security events and produces a timeline for managers, so they can quickly trace incidents back to their source without spending hours conducting manual investigations.
Similarly, Singularity's Purple AI virtual assistant can be prompted to dig deeper into security events and provide detailed summaries. Managers can also send it hunting for specific threats that might appear across the corporate landscape.
Image source: Getty Images.
SentinelOne is growing rapidly
SentinelOne generated a record $211 million in revenue during its fiscal 2025 third quarter (ended Oct. 31), which was a 28% increase from the year-ago period. The company's fiscal year 2025 will wrap up at the end of January, and it's on track to deliver $818 million in total revenue, which would also be a record.
Large enterprises are flocking to use SentinelOne's cybersecurity tools. The platform had 1,310 customers with an annual contract value of more than $100,000 at the end of Q3, which was an increase of 250 from the same quarter in 2024. It was the biggest jump in the company's history. Moreover, management said a record number of customers were spending over $1 million per year on its software.
SentinelOne consistently loses money because it invests heavily in customer acquisition, so its business grows as quickly as possible. However, it's on track to make significant progress at the bottom line in fiscal 2025. The company lost $217 million through the first three quarters of the year, which was an 18% reduction from the $266 million loss it generated in the year-ago period.
SentinelOne's operating expenses continue to climb, but they are doing so at a much slower pace than they have previously. When combined with solid revenue growth, more money can flow to the bottom line.
On a non-GAAP (adjusted) basis, which excludes one-off and non-cash expenses like stock-based compensation, SentinelOne actually delivered a small profit of $2.9 million through the first three quarters of fiscal 2025. That means fiscal 2025 is on track to be the first profitable year in the company's history when calculated using non-GAAP figures.
SentinelOne stock looks cheap compared to its peers
When SentinelOne stock peaked in late 2021, its price-to-sales (P/S) ratio topped 100, which made it one of the most expensive stocks in the entire tech sector.
The steep decline in its stock price, combined with the company's strong revenue growth since then, have pushed its P/S ratio down to a more reasonable level of 9.1. That makes it cheaper than CrowdStrike, Palo Alto Networks, and Zscaler, which are SentinelOne's primary competitors when it comes to AI-powered cybersecurity:
SentinelOne's Q3 revenue growth rate of 28% wasn't quite as strong as CrowdStrike's growth of 29% during its most recent quarter. However, it was much better than Palo Alto's revenue increase of 14%, and Zscaler's growth of 26%.
CrowdStrike, Palo Alto, and Zscaler each generate more revenue than SentinelOne overall, which might be why those stocks trade at a premium. However, investors often pay higher valuations for companies with faster growth, so I would argue that SentinelOne stock shouldn't be trading at such a steep discount to CrowdStrike, for example.
Technological research and consulting company Gartner predicts cybersecurity spending will grow 15% to $212 billion during 2025. SentinelOne has barely scratched the surface of that opportunity, and the pie is certainly large enough for multiple vendors. That's why I think SentinelOne could be a great stock to buy this year.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Zscaler. The Motley Fool recommends Gartner and Palo Alto Networks. The Motley Fool has a disclosure policy.
