SentinelOne tumbles as BofA, Morgan Stanley downgrade on competition worries
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SentinelOne (NYSE:S) shares fell almost 5% in premarket trading on Thursday as Bank of America and Morgan Stanley each downgraded the cybersecurity company, citing worries over competition.
Bank of America analyst Tal Liani lowered the firm's rating on SentinelOne (S) shares to neutral from buy, citing worries over the company's ability to meet consensus estimates and "increased competition from Microsoft (MSFT)." Liani also lowered the firm's per-share price target to $16 from $28.
Liani's top picks in the cybersecurity space are Zscaler (NASDAQ:ZS) and Check Point (CHKP), citing conservative guidance from Zscaler (ZS) and strong execution from Check Point (CHKP), despite the slowing global economy.
Morgan Stanley analyst Hamza Fodderwala downgraded SentinelOne (S) to equal-weight from overweight, citing "worsening checks" that indicate sales execution challenges.
"Though current 5X EV/NTM Sales (or 0.07X EV/Sales/Growth) multiple appears undemanding vs security peer growth-adjusted multiple of 0.20X, we think multiple upside is limited given negative revisions risk and much lower profitability vs peers," Fodderwala wrote in a note to clients.
Fodderwala also downgraded Zscaler (ZS) and Tenable (TENB), noting that the near-term time frame for both companies is difficult, but both should benefit in the long-run for various reasons.
Fodderwala lowered the ratings on both Zscaler (ZS) and Tenable (TENB) to equal-weight from overweight and cut the per-share price targets to $120 and $44, down from $162 and $47, respectively.
Last month, Wedbush Securities started SentinelOne (S) with an outperform rating, citing its "long runway for growth."
Analysts are largely bullish on SentinelOne (S). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates S a HOLD.