SentinelOne (S 2.06%) eclipsed CrowdStrike (CRWD -0.40%) as the highest-valued cybersecurity IPO in history back in June. SentinelOne raised $1.2 billion, with an implied valuation of $8.9 billion, which surpassed CrowdStrike's IPO valuation of $6.7 billion just two years earlier.

SentinelOne's stock price has already risen nearly 50% from its IPO price, but CrowdStrike's stock price has skyrocketed more than 520% since its public debut. As a result, CrowdStrike's market cap of $48.5 billion is still much higher than SentinelOne's market cap of $13.8 billion.

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However, SentinelOne still lists CrowdStrike as a major competitor in its IPO prospectus, and it's even launched a website that highlights its advantages against CrowdStrike. CrowdStrike has also started to list SentinelOne as a notable competitor in its latest SEC filings.

Could SentinelOne replicate CrowdStrike's post-IPO gains and eclipse its larger industry peer in the near future? Let's dig deeper into the companies' technologies, growth rates, and valuations to decide.

How does SentinelOne plan to challenge CrowdStrike?

Most cybersecurity companies install on-site appliances to power their security services. Yet that approach is expensive, requires constant maintenance, and can be difficult to scale as an organization expands.

CrowdStrike disrupted that market with Falcon, a cloud-native end-to-end security platform that doesn't require any on-site appliances. Falcon provides its services as subscription-based cloud modules, and its customers can easily add more modules to fit their growing and evolving needs.

SentinelOne claims CrowdStrike's cloud-native approach is too slow, too dependent on human analysts, and vulnerable to attacks that disrupt internet connections. To address those shortcomings, SentinelOne's Singularity platform provides a mix of on-site virtual appliances and cloud services.

SentinelOne hosts its threat response services locally, so they aren't dependent on internet connections and cloud-based services, and it processes threats with an AI-powered algorithm instead of human analysts. It claims this hybrid automated approach is more efficient than on-site or cloud-native platforms.

Both companies are growing rapidly

CrowdStrike's revenue soared 93% in fiscal 2020 and 82% in fiscal 2021 (which ended this January), and it anticipates 63%-64% growth in fiscal 2022. Analysts expect its revenue to rise another 40% in fiscal 2023.

CrowdStrike served 14,687 subscription customers in its latest quarter, representing a 75% increase from a year ago, and it's kept its dollar-based net retention rate above 120% ever since its public debut.

SentinelOne's revenue doubled to $93.1 million in fiscal 2021 (which also ended this January), and it expects its revenue to rise 114%-115% in fiscal 2022. Analysts expect its revenue to grow 73% in fiscal 2023.

SentinelOne's total number of customers surged more than 75% year over year to over 6,000 at the end of its latest quarter, while its dollar-based net revenue retention rate hit a record high of 130%.

But SentinelOne has some serious flaws

On the surface, SentinelOne's growth rates support the notion that it can disrupt CrowdStrike and traditional cybersecurity companies. But the company also has three glaring weaknesses that can't be ignored.

First, SentinelOne already serves about 40% as many customers as CrowdStrike, but analysts expect it to only generate 14% as much revenue as CrowdStrike this year. That big gap indicates SentinelOne generates much lower revenue per customer than CrowdStrike and suggests it might not have enough pricing power in the cutthroat cybersecurity market.

Second, SentinelOne is deeply unprofitable. On a generally accepted accounting principles (GAAP) basis, its net loss more than doubled year over year in the first nine months of fiscal 2022, and it spent more than two dollars for every dollar of revenue it generated. It's also unprofitable by non-GAAP measures. CrowdStrike is also unprofitable on a GAAP basis, but it's been profitable on a non-GAAP basis since last year. 

Lastly, SentinelOne's stock is already priced for perfection at 40 times next year's sales. CrowdStrike trades at 24 times next year's sales. SentinelOne's frothy valuation could cap its near- to mid-term gains.

SentinelOne isn't the next CrowdStrike (yet)

SentinelOne's platform is disruptive and its growth rates are stellar, but its widening losses and higher price-to-sales ratio will likely prevent it from replicating CrowdStrike's post-IPO gains within its first two years. Investors can still consider buying SentinelOne as a higher-growth cybersecurity play, but they shouldn't casually refer to it as the next CrowdStrike yet.