CRWD - SentinelOne rises as Stephens calls out 'best-in-class growth' coming free cash flows

2023-04-21 09:14:43 ET

SentinelOne ( NYSE: S ) shares rose nearly 1% in premarket trading on Friday as investment firm Stephens started coverage on the cybersecurity firm, citing its "best-in-class growth" and potential for strong free cash flow.

Analyst Brian Colley started SentinelOne ( S ) shares with an overweight rating and per-share price target of $22, stating that the company has "solidified" its position as the second company in the next-generation endpoint security space. It has also boosted its artificial intelligence-powered XDR platform into focusing on cloud security, identity and several other capabilities.

Though Colley sees competition from CrowdStrike ( CRWD ) and Microsoft ( MSFT ), it's likely that the $20B endpoint security market has a "large enough opportunity for multiple winners," with SentintelOne ( S ) "underpenetrated relative to its technology leadership."

Colley also noted that SentinelOne ( S ) has a differentiated go-to-market strategy and is increasingly seeing traction in areas like cloud security, MDR and identity, allowing the company to have "ample runway" for growth and operating leverage.

Colley also said SentinelOne ( S ) is trading at an "attractive" valuation, at only 5 times 2024 enterprise value-to-sales, roughly a 40% discount to its competitors. Additionally, there is likely to be a "positive inflection" in free cash flow and profitability in fiscal 2024 and 2025, which should "drive multiple expansion and a narrowing valuation discount."

Last month, SentinelOne ( S ) reported better than expected fourth-quarter results with revenue growth of 92% year-over-year .

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