Analysts Remain Positive on SentinelOne (S) Following 'Strong' Earnings; Shares Still Down 3%

Shares of SentinelOne (NYSE: S) trade more than 3% down in the pre-market Wednesday after the company reported earnings on Tuesday.

SentinelOne reported fourth-quarter revenue of $65.6 million, topping the consensus estimates of $60.7 million. Adjusted loss per share in the quarter was reported at 17c.

The company reported an adjusted gross margin of 66%, above the expected 62.7%. The number of customers in the fourth quarter was reported at 6,700.

For the current Q1, SentinelOne expects revenue in the range of $74 million to $75 million, above the analyst consensus of $68.8 million. Adjusted gross margin is expected to range from 63% to 64% in the first quarter, topping the estimated 62%. The company expects an adjusted operating margin between -84% and -86%.

For the full-fiscal 2023, SentinelOne expects revenue from $366 million to $370 million, beating the analyst consensus of $346.1 million. The company expects an adjusted gross margin of between 65% to 67%, above the estimated 64.8%. S anticipates FY2023 adjusted operating margin from -55% to -60%.

"Our fourth quarter ARR increased 123% year-over-year to $292 million, driven by strength from large enterprises, both new and existing," said Dave Bernhardt, CFO of SentinelOne.

BofA analyst Tal Liani is positive on S following earnings as he noted strong execution.

“The strong growth is attributed to continued secular tailwinds from legacy displacements, zero trust adoption, and Cloud proliferation, as well as increased product expansion and go-to- market scale. We reiterate Buy as we expect these healthy secular tailwinds to persist in the long-term. However, we revise our 2023-24E estimates to reflect guidance and reduce our PO from $67 to $54, now based on 21x our 2023E EV/Sales, vs. 26x previously, to reflect contraction of sector multiples,” Liani said in a client note.

BTIG analyst Gray Powell also took note of strong results.

“We thought it was a very good FQ4 report. We understand that some investors were hoping for slightly more upside on FQ4 ARR. That said, the seasonal net add trend looked about right to us and we think it is hard to complain too much about a 123% y/y growth rate. Commentary on new module adoption (now 33% on net ARR adds) was also encouraging. And as a result, we left with a high degree of confidence in S’s ability to exceed forecasts over the course of FY23,” Powell wrote in a memo.

By Senad Karaahmetovic | [email protected]

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