SentinelOne Earnings Preview – Can The Company Break Miss Streak?

As SentinelOne Inc. (NYSE: S) prepares to unveil its latest earnings report after today's closing bell, the cybersecurity firm finds underperforming. SentinelOne's stock, currently trading at $17.26, gained 4.45% yesterday leading in to earnings, but is down a concerning 24% year-to-date.

This downward pressure comes after a string of four consecutive quarters where the company has failed to meet consensus EPS estimates, raising concerns about its financial performance and future outlook.

While the company is projected to report an improved EPS loss of $0.19 per share compared to the $0.22 loss in the same period last year, the market is demanding more than just incremental progress. Revenue is expected to have grown 21.73% year-over-year to $242.17 million, but investors will be scrutinizing the underlying drivers of this growth and its sustainability.

Several recent events have undoubtedly contributed to the stock's volatility. The acquisition of AI security startup Prompt Security on August 5th, while strategically sound, has failed to ignite significant investor enthusiasm. Reports valuing the deal between $250 million and $300 million suggest a substantial investment, but the lack of immediate impact on annual recurring revenue (ARR) has tempered expectations. The market appears to be taking a “show me, don't tell me” approach to this acquisition.

The expanded partnership with Mimecast, announced on August 9th, aimed at bolstering AI capabilities and human risk visibility, could have been a positive catalyst. However, the stock price declined by 11% in the subsequent week, highlighting the specific headwinds SentinelOne is facing, independent of broader market trends.

Despite the challenges, analyst sentiment appears cautiously optimistic, as evidenced by recent price target adjustments following the last earnings report. Scotiabank raised its target to $25, DA Davidson to $23, and BTIG to $30, citing factors such as potential benefits from competitor woes, solid earnings, improved margins, and an aggressive market share capture strategy. The average price target reflects an anticipation of future growth, but the company needs to deliver on these expectations.

While the prevailing narrative focuses on missed earnings and market pressures, it is worth considering that the market may be underestimating SentinelOne's long-term potential. The company is not just another cybersecurity vendor; it is building a comprehensive AI-powered platform that could fundamentally change how organizations approach security. 

Furthermore, the market may be too focused on traditional financial metrics and failing to fully appreciate the value of SentinelOne's platform approach. By offering a unified security platform, SentinelOne can help organizations reduce complexity, improve efficiency, and enhance their overall security posture. This value proposition is not easily quantifiable in the short term, but it could drive significant growth in the long run.

SentinelOne faces legitimate challenges, yet the cybersecurity market is vast and growing, and SentinelOne is well-positioned to capitalize on this opportunity. The upcoming earnings report will be a crucial test, but it should not be the sole determinant of the company's ultimate success.