SentinelOne stock price forecast ahead of earnings: buy or sell?

SentinelOne stock price has imploded in the past few months, even as the cybersecurity industry has continued to grow this year. S peaked at $29.26 in December last year, reaching a low of $15.40 in April. It was trading at $17.15 as traders waited for its earnings.

SentinelOne earnings ahead

SentinelOne is a top company offering AI-powered cybersecurity solutions to clients like Aston Martin, Norwegian Airlines, Uber, Hitachi, Samsung, and ServiceNow. 

Its main platform is known as Singularity, which offers unfettered visibility, detection, and autonomous agents. This platform has grown rapidly in the past few years as demand for cybersecurity solutions has soared.

Data compiled by SeekingAlpha shows that the annual revenue rose from $93.1 million in 2020 to over $821.5 million last year. However, the main challenge is that the company has continued to lose money.

SentinelOne’s net loss stood at over $288 million last year. Its trailing twelve-month (TTM) net loss jumped to over $4265 million. 

The most recent results showed that the company’s revenue rose by 23% to over $229 million, with its annual recurring revenue surging by 24% to $948 million. This growth happened as more companies moved into its platform. 

The next important catalyst for the company will be its upcoming financial results. Analysts expect the upcoming results to show that its quarterly revenue will be $242 million, up by 21.73% from the same period last year. This forecast is in line with what the company guided in the last results.

SentinelOne’s earnings per share (EPS) is expected to come in at minus 19 cents, up from 22 cents. 

While its second quarter results are important, the SentinelOne stock price will react to its forward guidance for the third quarter. Its Q3 revenue is expected to be $255 million, up by 21% from the same time last year. 

Judging by other companies in the space like Okta and Palo Alto Networks, odds are that its guidance will be higher expectations. 

A key challenge is that SentinelOne stock price is still overvalued based on the rule-of-40 model. This is a common approach that looks at its revenue growth and its margins. 

SentinelOne’s business is expected to grow by 22% this year, while the non-GAAP operating margin will be between 2% and 4%. Assuming it hits the upper side of the range, then it has a rule-of-40 multiple of 26%, much lower than the key point at 40. 

On the positive side, the rule-of-40 metric based on the free cash flow (FCF) of 24% gives it a figure of 46%.

SentinelOne stock price technical analysis

The daily chart shows that the SentinelOne share price has crashed in the past few months, moving from a high of $29.25 in November to a low of $15.40. 

It has remained below the 50-day and 100-day moving averages, a sign that the bearish trend is continuing. On the positive side, it has formed a double-bottom pattern at $15.40, whose neckline is at $21.3.

The Percentage Price Oscillators (PPO) has formed a bullish crossover pattern. Therefore, the stock will likely rebound and possibly hit the 100-day moving average at $18.40. A drop below the support at $15.40 will invalidate the bullish outlook.