As technology increasingly enables the global economy and underpins daily life, the need for protection against online threats is more important than ever. SentinelOne(NYSE: S) has established itself as a leader in endpoint security, safeguarding network-connected devices through a distinct focus on artificial intelligence (AI)-powered capabilities across a broad platform of cybersecurity solutions.
Despite robust growth, SentinelOne's stock has faltered over the past year, declining nearly 41% from its 52-week high and remaining essentially flat since late 2022. Is this recent weakness a harbinger of further turbulence, or are there signs that shares are poised for a breakout?
Let's explore where SentinelOne stock might be headed in the next 12 months.
A leader in AI-powered cybersecurity
For SentinelOne, AI has been a core strategic focus for the past decade, pioneering autonomous threat prevention, detection, and response across endpoints like computers and mobile devices. The company's "Singularity" platform identifies and stops attacks in real-time, securing digital assets and protecting sensitive data.
In recent years, SentinelOne has expanded its domain to capitalize on high-growth opportunities in cloud security, data analytics, and identity security, using a scalable and unified approach. With its technological edge and unique value proposition, the company believes it's well-positioned to tap into a $100 billion estimated total addressable market opportunity.
Image source: SentinelOne.
A financially transformative year
SentinelOne had struggled to convert its impressive operating momentum into sustainable profitability, with large recurring losses in recent years. A reset of expectations, compared to what may have been unrealistic financial targets around the time of the company's 2021 initial public offering, provides context for the stock price weakness over the period.
That said, the latest trends are encouraging. In the reported fiscal 2025 (for the full year ended Jan. 31), total revenue increased by 32% year over year, with a significant milestone being the positive adjusted earnings per share (EPS) of $0.05, driven by a firming operating margin. Several key tailwinds are driving the company's improved position, including:
A strong response to its new Purple generative AI integration.
Increased diversification, with over 50% of bookings last year coming from non-endpoint security solutions (outside its traditional focus area).
Rising average deal size values.
Growing adoption of additional products among existing customers, with a sharp increase in enterprise clients using three or more solutions.
Traction with large customers generating over $100,000 in annual recurring revenue (ARR).
Management is citing a clear inflection point toward more consistent profitability, driven by expanded scale. For fiscal 2026, SentinelOne is targeting annual revenue growth of around 23%, reaching $1 billion, alongside an adjusted operating margin between 3% and 4%, reversing the negative 3% result last year.
Fierce cybersecurity competition
By all accounts, SentinelOne's growth trajectory is strong. Its fundamentals are further bolstered by a solid balance sheet, with $722 million in cash and virtually no financial debt.
However, the company faces a highly competitive cybersecurity landscape, with larger rivals like CrowdStrike, Palo Alto Networks, Check Point Software Technologies, and Microsoft offering alternative endpoint protection solutions. While SentinelOne's AI focus was once a key differentiator, competitors have quickly incorporated similar autonomous features, introducing uncertainty about the company's potential. CrowdStrike boasts a broader cybersecurity scope, while Palo Alto is more profitable.
These factors are reflected in SentinelOne's valuation, with the stock trading at under 6 times its projected 2025 revenue, a forward price-to-sales (P/S) ratio significantly below its peer group average of over 10.
On one hand, there is a case to be made that shares of SentinelOne are simply undervalued, although investors who believe the company will fall short of capturing significant market share might be able to justify the discount.
After weighing the pros and cons of SentinelOne's outlook, I'm cautiously optimistic about its prospects. This year will be crucial for the company to demonstrate that its strategy for achieving more profitable growth is paying off. I predict that SentinelOne's stock price will rise over the next 12 months. The potential that its results over the next few quarters will surpass Wall Street expectations could be the catalyst needed for the stock to rally higher.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
