On Friday, Shares of SentinelOne, Inc. (NYSE: S) plunged by over 35%. The significant drop was driven by the company’s quarterly earnings and forecast, which were severely impacted by a challenging economic climate and intense competition.
Over half of the 30 analysts covering the stock have reduced their target prices, pointing to longer deal cycles and diminishing demand from enterprise customers. These customers are currently hesitant to place new orders due to soaring inflation and increasing interest rates.
The median price target for SentinelOne now stands at $18, marking a 13% decrease from its previous closing price. Compared to sector leader Palo Alto Networks Inc, the company trades at a higher price-to-sales ratio of over 14 times its 12-month forward sales estimates.
BTIG analysts, who downgraded the stock to “neutral,” suggested that factors beyond the weak economy may be impacting SentinelOne.
They said, “Given the degree of the Q1 miss after the company initially guided in mid-March and the magnitude of the guide down, it simply feels like something else is at play here.”
In its latest quarterly report, SentinelOne reported a revenue growth of approximately 70%, which, despite being substantial, marked its slowest growth since going public. The company also projected a slower rise of 38% in the second quarter, both figures falling short of estimates.
Analysts from various brokerages highlighted competitive pressure from industry giants like Microsoft Corp and larger peer CrowdStrike Holdings Inc.
Guggenheim analysts expressed skepticism regarding the company’s forecasts, stating that they do not fully account for the potential economic decline. They emphasized the difficulty of having confidence in current forecasts.