Citi analysts downgrade SentinelOne, Netskope on valuation concerns

Investing.com -- Analysts at Citi downgraded shares of SentinelOne and Netskope to Hold from Buy, saying the stocks have rallied sharply since April and now reflect expectations for a near-term demand inflection that may take longer to materialize.

The two cybersecurity stocks have risen about 90% from their April lows, while the broader cybersecurity group has also benefited from optimism around AI-driven security demand and consolidation. The analysts said valuations across the sector have expanded, with larger platforms such as Palo Alto Networks and CrowdStrike commanding significant premiums.

The analysts said SentinelOne and Netskope would need to deliver immediate new business tied to Mythos, stronger AI-security demand or evidence of gaining share across cybersecurity segments to justify their current valuations. Recent quarterly checks with 51 cybersecurity resellers and fieldwork at Black Hat 2026 offered mixed signals and tempered near-term optimism, they said.

Despite the downgrades, the analysts raised their DCF-based price target for SentinelOne to $24 from $17 and Netskope to $17 from $16, reflecting confidence in their longer-term prospects. They said both companies remain about one turn cheaper than Zscaler on CY2027 enterprise-value-to-revenue multiples.

The analysts expect SentinelOne and Netskope to demonstrate consecutive quarters of improving execution and sustained margin expansion before attracting further investor support. They also said they would monitor SentinelOne under new CFO Sonalee Parekh and await the appointment of a new CFO at Netskope.

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