Shares of SentinelOne (NYSE: S) slid 15.5% through 11 a.m. ET Friday after the cybersecurity company reported much bigger losses than Wall Street had anticipated in its first quarter of fiscal 2025.
Heading into the quarter, analysts forecast SentinelOne would lose only $0.05 per share on $181.1 million in sales. In fact, the company reported this morning that its losses were $0.23 per share, despite sales exceeding expectations at $186.4 million.
SentinelOne’s first quarter
Despite the bad earnings number, SentinelOne had some positive news to report as well. Sales that exceeded expectations actually soared 40% year over year. Gross profit margins jumped 5 full percentage points to 73%, and operating profit margins weren’t exactly “profitable,” but their negativity was cut in half, to 43% — so I guess that’s good.
As an investor, what appeals to me most is SentinelOne’s saying that it just reported its first quarter of positive free cash flow (FCF). Even if it isn’t yet profitable as defined by generally accepted accounting principles (GAAP), it’s at least now generating real cash profits: $41.1 million worth in just the first quarter, implying full-year FCF might be as high as $160 million.
Does this make SentinelOne a buy?
On a $5.2 billion market capitalization, this implies the stock could currently cost as little as 32 times annual FCF, which seems a good price if the company can keep growing revenue at 40% and increase FCF at a similar pace.
Other investors, however, might have been spooked by the company’s forecast. Management said that second-quarter revenue will only be about $197 million, so better than the first quarter but slightly below Wall Street estimates.
Full-year guidance — $808 million to $815 million — similarly came in short of Street expectations, with SentinelOne also noting that its GAAP earnings will remain negative all year long.
In short, the FCF news gives investors at least some reason to want to buy SentinelOne today, but its increase might not be great enough to keep growth investors on board.
Should you invest $1,000 in SentinelOne right now?
Before you buy stock in SentinelOne, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SentinelOne wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $677,040!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of May 28, 2024
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why SentinelOne Stock Crashed 15.5% on Friday was originally published by The Motley Fool
From: Yahoo.com
Financial News
