SentinelOne stock falls after Morgan Stanley, BofA downgrades

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By Senad Karaahmetovic

SentinelOne (NYSE:S) is trading more than 2.5% lower in pre-market after sell-side analysts downgraded the cybersecurity stock, citing a difficult macro environment and increased competition.

Morgan Stanley analysts moved to the sidelines and slashed the price target by nearly 50% to $16 per share. The analysts argue that SentinelOne stock is “too cheap to Sell, too early to Buy”.

“Tougher macro and sales execution challenges suggests material downside risk to consensus CY23/24 ARR forecasts and pushes out timeframe for positive profitability. While valuation is undemanding at ~5X EV/NTM revs for 40% fwd revenue CAGR, we think these risks limit multiple upside nearer term,” they wrote in a downgrade note.

Similarly, Bank of America analysts cut to Neutral with the same price target of $16 per share. They see elevated risks from the competition with Microsoft (NASDAQ:MSFT) and Crowdstrike (NASDAQ:CRWD), as well as “high exposure to SMBs coupled with worsening IT budget dynamics, aggressive CY23/CY24 guidance targets, and declining deal durations.”

“There might be only little risk for further declines [in S stock], yet we believe the risks outlined above might limit upside to the stock until the spending environment stabilizes,” the analysts said.

SentinelOne stock closed at $14.39 yesterday.