SentinelOne Downgraded by Barclays

First, I want to state that I’m long SentinelOne and added more shares today. With that said, I wanted to see what the reasons were for today’s downgrade by Barclays. Here’s what I found:

The three key reasons behind the S stock downgrade are:

1. Corporate endpoint market remains big and can support multiple disruptors;

2. S faces more competition at this scale than CrowdStrike (NASDAQ: CRWD) did when it was at similar scale; and

3. Profitability is still 2+ years out.

On point no.2, Kalia further noted:

“SentinelOne has been growing ARR >100% on an organic basis and we think the company will continue at a trajectory greater than 50% for next several years. However its trajectory may not follow in step with CRWD given a more competitive environment (i.e. there was no CRWD when CRWD was in its hyperbolic growth stage),” the analyst said in a client note.

Back to the profitability concerns, the analyst urges investors to own “companies whose valuations can be tied to profitability more near term.”

“This part of the call is more positioning driven, as we think names with profitability to anchor valuation will be more defensive,” the analyst concluded.


My Take:

1&2 speak to competition. While it might be true that S faces more competition today than CRWD did when they were of a similar size, the market size is also larger today and continuing to grow. More competition just legitimizes the opportunity ahead IMO and SentinelOne has proven they’re to be considered a formidable consideration with triple digit growth and a FY guide of 81% (higher than any other company that’s discussed here).

For the 3rd point, all I can say is that my investment timeframe is different than the analyst. The path to profitability is there, which is all that matters to me at this stage in their lifecycle.