Analysts reset SentinelOne stock price targets after earnings

Tomer Weingarten is not an ambulance chaser.

The pejorative term describes a lawyer “who seeks out accident victims as clients and encourages them to sue for damages,” and SentinelOne CEO Weingarten (S) says it’s not his company’s style.

Related: Analysts reboot CrowdStrike stock price target after global blackout

The chief executive made his comments during the cybersecurity company’s earnings call. And he had a lot to say about the industry in general and last month’s CrowdStrike (CRWD) IT disruption in particular, where a botched software update triggered a worldwide technology meltdown.

“We’re talking about the largest IT outage ever, systematically affecting millions of people, disrupting thousands of businesses, costing billions of dollars,” Weingarten said. “And this was a global, basically fleet-wide outage, unprecedented in scope and scale…I’ve never really seen anything like it in my lifetime.”

“This was an avoidable incident that arose from not following best software implementation practices,” Weingarten said.

While SentinelOne has “quite a book of business” regardless of the CrowdStrike incident, Weingarten acknowledged that “there have been customers that have pulled away.”

“We’re not there to chase ambulances,” he said. “If someone shows up at my hospital, I’m damn fine to let them in, but we do it at the pace of the clients.”

SentinelOne CEO cites ‘overzealous marketing’

As Weingarten sees it, substandard platform architectures are extremely risky and can cause single points of failure, “as evidenced by the string of recent breaches at Microsoft in the largest IT disruption in history caused by our direct competitor, CrowdStrike.”

CrowdStrike is scheduled to report earnings on Aug. 28, and a company spokesman suggested listening to the company’s earnings call regarding Weingarten’s comments.

Related: Analysts Reboot Snowflake Share Price Target After Earnings

“Addiction to fragile software can quickly disrupt our way of life and cost the companies they’re supposed to protect billions in damages,” he said.

There has been a lot of finger-pointing since the outage, with Ed Bastian, CEO of Delta Air Lines (DAL) which was forced to cancel more than 5,500 flights, blaming CrowdStrike. For its part, CRWD said it did not fail to conduct “testing and validation” of its system and alleged that Delta denied assistance to restore operations.

“Self-proclaimed industry leader and overzealous marketing creates a false perception of reliability; ultimately, the end user suffers, which is why we need to focus on fact, not fiction,” Weingarten said. “Operational hygiene and process controls are critical to any reliable software. Anything other than that is a breach of customer trust.”

The Mountain View, Calif., company, founded in 2013, beat Wall Street’s second-quarter earnings expectations.

SentinelOne reported adjusted earnings of 1 cent compared with a loss of 8 cents a year earlier, marking its first quarter of adjusted net income and positive earnings.

“Importantly, we have achieved a significant profitability milestone, our first quarter of positive net income and earnings per share,” Weingarten said. “Our pace and progress to profitability remains best-in-class.”

Revenues totaled $199 million, up 33% from the previous year. Analysts expected the company to break even with revenues of $197.3 million.

Annual recurring revenue from subscription-based services rose 32% to $806 million, beating estimates of $801.8 million.

Shares of SentinelOne were down 2.7% at $24.08 at last check. Shares are down 12.3% year-to-date but are up 45.3% from a year ago.

Veteran trader: “Color me impressed”

“Color me impressed,” said TheStreet Pro’s Stephen Guilfoyle. “There’s not much to suggest that SentinelOne was able to take anything from CrowdStrike during the July issues. Since they’re also long-time CrowdStrike, that’s fine with me.”

That said, Guilfoyle added, “sales are growing, margins are growing, guidance has been solid, free cash flow is impressive, unadjusted profitability is being addressed, and the company is not there yet just because of stock-based compensation.” .

More tech stocks:

• Analysts reset AMD stock outlook after AI acquisition
• Analyst resets Nvidia stock price target ahead of earnings
• The trader who predicted the outlook for Palantir, SoFi, Rocket Lab rally updates

“Demand for SentinelOne’s services does not appear to be abating as leading-edge cyber security will become a necessity more than ever,” he said. “As far as… from what my feeble brain can understand, SentinelOne technology is at the top of the industry food chain.”

Analysts adjusted their stock price targets for SentinelOne after the earnings report, with many citing the IT shutdown.

Scotiabank analyst Patrick Colville raised his price target on the investment firm to $25 from $18 and affirmed a sector perform (effectively neutral) rating on the stock.

While new annual recurring revenue declined year-over-year in the second quarter, management sees CrowdStrike’s disruption as a net positive for the company as more customers and partners consider the company in more deals and win rates increase. improve, the analyst said.

Related: Short seller reveals Super Micro stock in latest report

However, CrowdStrike’s customers are under no pressure to act, and the company is barely adjusting its top guidance. Overall, Colville said he’s waiting for data in his checks on whether the company can more fully capitalize on CrowdStrike’s disruption.

DA Davidson lifted its price target on SentinelOne to $23 from $18.50 and maintained a neutral rating on the stock.

SentinelOne reported solid second-quarter earnings growth and increased guidance, operating margins and free cash flow margin improvement continue to impress, and CrowdStrike disruption could modestly boost its new business in the near term, analyst tells investors in a research note.

DA Davidson adds that it continues to see annual recurring revenue growth in the low 20s as likely in the near term. The investment firm said the stock looks fully valued.

BTIG lifted the firm’s price target on SentinelOne to $30 from $28 and set a buy rating on the stock.

SentinelOne reported solid earnings growth and increased guidance, operating profit and free cash flow were substantially better than Wall Street forecasts, and management took an aggressive tone on the potential to gain incremental market share. terminal security after the CrowdStrike outage, BTIG said. .

BTIG also noted that management said it has already seen some large customers switch to SentinelOne.

Related: Veteran fund manager sees world of pain coming for stocks