UPDATE: SentinelOne Inc (S) PT Lowered to $45 at Loop Capital

March 16, 2022 6:43 AM EDT
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Price: $24.45 -1.09%

Rating Summary:
    11 Buy, 4 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 11 | Down: 23 | New: 53
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(Updated - March 16, 2022 6:44 AM EDT)

Loop Capital analyst Yun Kim lowered the price target on SentinelOne Inc (NYSE: S) to $45.00 (from $65.00) while maintaining a Buy rating.

The analyst comments "SentinelOne reported a strong quarter with ARR/customer metric showing a continued increase as the enterprise adoption of its platform continues. Its revenue and ARR growth remained strong at 120%+ y/y over the past three quarters. Its dollar-based net retention rate (NDNRR) also came in at 129%+ over the past three quarters. Overall, the company’s business momentum remains strong, and this is implied in its solid Q1 guidance that calls for y/y revenue growth of 98-101%, which is significantly above our/Street’s 84% growth rate. It also guided to strong 79-80% revenue growth for the year, vs. our/Street estimate of 70%/73%, respectively. Note that its guidance does not include any contribution from the Attivo Networks acquisition, which is expected to close in F2Q. Our positive investment thesis is driven by the following: 1) urgent need to replace legacy anti-virus endpoint solution that is no longer effective against today’s more sophisticated cyberattacks; 2) recent work-from-home (WFH) trend increasing not only the number of endpoints but also the need to secure and manage them outside of the corporate network; 3) continued rapid increase in the number of endpoints that need to be secured including IoT devices and cloud workloads; 4) agent-based endpoint platform that is evolving into a strategic beachhead for XDR (extended detection and response), which represent the next-generation unifying platform SOC (security operation center). In our view, SentinelOne’s key competitive differentiation is its focus on automating workflow around detection and response, which is likely to be an increased focus area for large organizations in their security spending priority going forward. Hence, we believe S is well positioned to not only benefit from the large replacement opportunity in the endpoint market but also benefit from this spending trend towards automation, which we highlighted in our industry report. While shares currently trade at 18x and 11x our CY22/CY23 revenue estimates, we are projecting 86% revenue CAGR from CY20 to CY23, which represents the fastest growth rates in our coverage universe. When its CY23 sales multiple is adjusted for respective growth rates (EV/S-togrowth ratio), shares trade at a significant discount vs. the company’s hyper-growth peers (those with 30%+ revenue CAGR over the next 3-years). Hence, in our view, there could be a meaningful upside to the stock if the company can simply execute on its growth strategy and meet our revenue growth estimates, which we are comfortable with. Reiterating our Buy rating and lowering our PT from $65 to $45 on a more conservative 10-year growth assumption (lowered from 50% CAGR to 44%). $45 PT implies growth-adjusted multiples that are consistent with its hypergrowth peer averages."


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