Earnings Release: Here's Why Analysts Cut Their SentinelOne, Inc. (NYSE:S) Price Target To US$47.94

Investors in SentinelOne, Inc. (NYSE:S) had a good week, as its shares rose 6.9% to close at US$37.67 following the release of its yearly results. Revenues of US$205m beat expectations by a respectable 2.4%, although statutory losses per share increased. SentinelOne lost US$1.56, which was 30% more than what the analysts had included in their models. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for SentinelOne

After the latest results, the 17 analysts covering SentinelOne are now predicting revenues of US$369.9m in 2023. If met, this would reflect a substantial 81% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.25 per share. Before this latest report, the consensus had been expecting revenues of US$346.3m and US$1.14 per share in losses. Overall it looks as though the analysts were a bit mixed on the latest consensus updates. Although there was a nice uplift to revenue, the consensus also made a moderate increase in its losses per share forecasts.

Spiting the revenue upgrading, the average price target fell 24% to US$47.94, clearly signalling that higher forecast losses are a valuation concern. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic SentinelOne analyst has a price target of US$68.00 per share, while the most pessimistic values it at US$35.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that SentinelOne's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 81% growth on an annualised basis. This is compared to a historical growth rate of 120% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 14% annually. So it's pretty clear that, while SentinelOne's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of SentinelOne's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple SentinelOne analysts - going out to 2025, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for SentinelOne you should be aware of.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.