AI Stock with Potential Upside

The market may be overlooking a promising AI cybersecurity company, SentinelOne. Though many AI stocks have performed well, SentinelOne's stock is down over 50% from its initial share price and over 70% from its all-time high since its IPO in the summer of 2021.

SentinelOne is part of a new generation of cybersecurity companies. Its Singularity Platform uses artificial intelligence to detect and respond to security threats. Singularity has garnered industry recognition from Gartner and helped the company gain business with Fortune 10 companies and hundreds in the Global 2000.

Valuation and Growth

SentinelOne went public in mid-2021. Its market cap peaked at over $20 billion shortly after it began trading, on just over $200 million in revenue that year. The stock's price has declined while SentinelOne continues to grow, shifting its valuation. Its price-to-sales (P/S) ratio was once over 105 but has plunged to 7.6.

CrowdStrike, a chief competitor, trades at a P/S ratio of 28.7, while Palo Alto Networks trades at nearly 15 times its revenue. SentinelOne grew revenue faster than both companies last quarter. However, CrowdStrike and Palo Alto Networks have superior operating margins.

SentinelOne's profit margins have improved with revenue growth, and it has been cash flow-positive over the past four quarters. It has no debt and $1.1 billion in cash and investments.

Future Outlook

SentinelOne concluded its fiscal year 2025 with $821 million in revenue. Analysts estimate $1.0 billion in revenue this year and $1.2 billion next year. If SentinelOne grows by 15% the year after, its annual revenue could be roughly $1.4 billion three years from now.

Assuming the company grows to $1.4 billion in annual revenue, the stock would only need a P/S ratio of 9 to 10 to double its market cap over the next three years. There is no shortage of opportunity in cybersecurity, and SentinelOne has shown it can compete.