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BofA upgraded SentinelOne (NYSE:S) to Buy from Neutral citing robust industry tailwinds and improving macro conditions.
The firm also raised the price target on the shares to $35 from $26.50.
The analysts said that though competition remains intense, their more positive view is steered by expectations for the near-term pathway to profitability and Free cash flow, or FCF, generation, re-accelerating net new ARR growth, long-term industry tailwinds, and improving market conditions.
The analysts added that their latest checks were positive which could also support the stock near term.
SentinelOne’s stock was a sluggish for much of 2023, yet has outperformed in the last three months, rising about 78% versus 35%-60% for CrowdStrike (CRWD), Palo Alto (Palo Alto Networks) and Zscaler (ZS).
The analysts believe the strong momentum should continue through the fourth quarter of ’24 and have raised their estimates to reflect a more optimistic view on SentinelOne’s ability to overcome competitive challenges and continue gaining share in endpoint security and adjacent markets.
BofA noted that SentinelOne’s revenue growth slowed significantly from 106% year-over-year in 2022 to its expected nearly 46% in 2023, driven by law of large numbers, but also weak macro conditions and competitive dynamics. However, macro has started to show signs of improvement, cyber spending should be strong in 2024, and Endpoint Detection and Response, or EDR, remains a top CISO priority.
SentinelOne’s net new annual recurring revenue, or nnARR, growth is expected to decline by 12% year-over-year in 2023, yet BofA models a meaningful reacceleration to +10% growth for 2024, according to the analysts.
The analysts view this as an achievable target and see room for upside on topline and nnARR from further cross-selling of modules, improving net retention rates, strong partner relationships, and international expansion.
SentinelOne (S) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is more positive with a Buy and so is the average Wall Street analysts’ rating, Buy.
S +5.45% to $30.57 premarket Feb. 14