On Thursday, Scotiabank (TSX:BNS) adjusted its outlook on shares of SentinelOne Inc (NYNYSE:SE:S), a cybersecurity firm, by increasing the price target to $26 from $25 while maintaining a Sector Perform rating.
The modification follows SentinelOne's announcement of new Annual Recurring Revenue (ARR) growth in the third fiscal quarter, which, although robust, fell marginally short of the market's expectations. According to InvestingPro data, the company has shown impressive momentum with a 65.4% price return over the past six months, while analysts' targets range from $22.12 to $35.
The company's management expressed optimism that the recent CrowdStrike (NASDAQ:CRWD) outage could benefit SentinelOne, as it has led to the company being considered in more deals with strong win rates. However, they noted that customers affected by the CrowdStrike incident are not under immediate pressure to switch providers.
With a robust gross profit margin of 73.35% and strong revenue growth of 38.04% in the last twelve months, InvestingPro analysis suggests the company has financial strength to capitalize on such opportunities.
Looking ahead, SentinelOne anticipates that its partnership with Lenovo will contribute to revenue growth in the second half of fiscal year 2026. This prospect is encouraging, but it is somewhat more distant than some investors might have hoped for.
Despite SentinelOne's position as a leading company in its sector, the firm experienced a rare operating margin miss in the third quarter and did not adjust its fiscal year 2025 guidance upward. As a result, Scotiabank's bottom line estimates for SentinelOne have not significantly changed.
In the words of the Scotiabank analyst, "SentinelOne is a top-tier company, but we remain on the sidelines as we await evidence in our checks to support high investor expectations for improving top and bottom-line growth." This statement reflects a cautious stance, waiting for more concrete signs of the company's growth potential before adopting a more bullish position.
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