According to consulting firm McKinsey & Company, a cyber attack can cost as much as $10.50. Trillion Businesses spent only about $168 billion on protection in 2022, despite the potential to reach significant losses by 2025. McKinsey estimates he should spend $2 trillion at this point. That means there is a $1.8 trillion gap in the market, which presents an opportunity for cybersecurity providers.
Modern threats are highly sophisticated, launching attacks within hours rather than days or weeks. Therefore, artificial intelligence (AI) is now playing an important role in security software. sentinel one (S -0.70%) It is truly a leader in its field. The company has built a portfolio of AI-based products that automate everything from threat hunting to incident response.
SentinelOne is currently growing revenue faster than some of the biggest names in the cybersecurity industry, but the company’s stock price is down 77% from its all-time high reached during the height of the tech frenzy in 2021. Here’s why investors are glad to have bought on the spurt. When they look back years later.
Artificial intelligence will transform cybersecurity
According to cybersecurity providers palo alto networks, 93% of security operations centers still rely on manual processes. Unfortunately, this means that 23% of incident alerts are ignored or never investigated simply due to the heavy workload security professionals face. To make matters worse, malicious attackers are now able to infiltrate networks and steal valuable data from businesses within hours, compared to just 44 days just two years ago. became.
It is simply impossible for a team of human security experts to keep up with the sheer volume of modern threats. According to SentinelOne, in 2022 more than 26,000 new vulnerabilities were discovered, and already this year more than 16,000 were discovered, which could be an even higher record in 2023. It means that there is a gender.
Artificial intelligence is the answer to addressing these challenges. SentinelOne’s flagship platform is called Singularity, a full-stack cloud, endpoint, and identity protection solution. It features real-time threat detection and eliminates the need for manual human intervention in the event of an attack. It offers unique tools such as one-click rollback, allowing you to instantly undo unauthorized changes to your network even in the event of a successful compromise.
In April, SentinelOne released a new tool called Purple AI. This is a chatbot that utilizes generative AI and large-scale language models, much like his ChatGPT from OpenAI that gained public attention. Admins can prompt Purple AI to instantly assess their company’s cybersecurity posture, and the chatbot can identify new threats sweeping the business world within their network. You can ask them to look for it.
Additionally, as mentioned above, it is designed to reduce the “vigilance fatigue” that plagues security operations personnel. When a security alert occurs, users can prompt her Purple AI to instantly generate a report detailing the incident, saving manual human time.
SentinelOne is outgrowing many of its peers
Despite the critical need for cybersecurity software, the difficult economic environment has slowed corporate spending over the past 12 months. As a result, most providers experienced slower revenue growth.
Sentinel One told investors in its financial results report for the first quarter of fiscal 2024 ended April 30 that usage and consumption are down and macroeconomic conditions are impacting deal sizes. He said there was. As a result, the company lowered its full-year sales forecast from $640 million to $600 million, disappointing investors.
However, the situation improved in the second quarter ended July 31. SentinelOne generated his $149 million in revenue, up 46% year-over-year.that beat cloud strikeRevenue growth for the quarter was 37%, and Palo Alto Networks’ growth was 26%. SentinelOne is a much smaller company than its competitors, so it can more easily generate higher growth rates, but its results still show solid demand and execution.
In terms of demand, the company has seen a 30% increase in the number of customers on its platform. More than 11,000 companies currently use SentinelOne, with 994 spending more than $100,000 annually. Its customer cohort grew by an even more impressive 37%.
The strong results gave SentinelOne the confidence to slightly increase its fiscal 2024 outlook to $605 million, after previously lowering it.
Why SentinelOne stock is worth buying now
SentinelOne CEO Tomer Weingarten says the company is targeting a $100 billion viable opportunity, but given the aforementioned McKinsey analysis, it may be underestimated in the long term. .
The path to a multitrillion-dollar market could be accelerated thanks to new rules imposed by corporate regulators. For example, in July, the U.S. Securities and Exchange Commission announced that it would require public companies to announce significant cybersecurity incidents within four days. If these companies didn’t consider advanced cybersecurity software important, they now will.
Sentinel One stock has plummeted 77% from its all-time high and currently trades at just 10.1 times sales. This is not only close to the lowest valuation since the company became a public company in 2021, but also significantly cheaper than CrowdStrike stock, which trades at 15.5x P/S.
CrowdStrike is a larger and more established company in the cybersecurity industry. Investors are willing to pay a premium for the company’s stock because the company has about five times the revenue of his SentinelOne and is also a highly profitable company. However, as mentioned earlier, SentinelOne has an advantage in terms of growth and, like other competitors, relies on AI, so it should continue to see strong demand.
For these reasons, we think SentinelOne stock currently presents an attractive risk/reward proposition relative to other stocks in the space. If the company continues to execute, its stock price probably won’t be discounted as deeply over an extended period of time.