The cybersecurity industry is rapidly growing in importance as cyberthreats become more sophisticated. Many bad actors are even using advanced technologies like artificial intelligence (AI) to stage attacks, which calls for new levels of protection.
Consulting firm PwC surveyed 4,410 leading CEOs earlier this year. A stunning 25% of respondents felt their company would be 'highly' or 'extremely' exposed to cyberthreats over the next five years. They perceived cyberattacks as an equal risk to geopolitical conflicts, potentially even more damaging than climate change.
SentinelOne (S 1.70%) is a leading provider of AI-based cybersecurity, with a focus on automated threat detection and incident response. The company just reported positive financial results for the fiscal 2024 third quarter (ended Oct. 31), and its stock immediately soared 20%. Here's why investors sitting on idle cash -- money they don't need for immediate expenses -- should consider allocating at least $100 to SentinelOne stock and holding it for the next decade.
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Injecting AI into the entire cybersecurity stack
The rise of cloud computing makes cybersecurity more complex than ever before. Businesses now run most of their operations online, meaning they must protect their networks, sales channels, data, applications, and even their employees' identities.
SentinelOne covers all those bases for more than 11,500 organizations. The company's Singularity platform is a holistic cloud, endpoint, and identity-protection solution with automation at its core. SentinelOne believes machines are better suited to handling security incidents because they can react much faster than humans.
In fact, a report by Palo Alto Networks highlighted that 93% of security operations centers within organizations still rely upon manual, human-led processes. It's causing 23% of security alerts to go uninvestigated due to the growing workload on security managers. That creates enormous vulnerabilities, and AI is capable of solving the problem.
Singularity is equipped with a host of AI-powered tools. Its Storyline technology autonomously tracks and contextualizes event data for managers, complete with actionable insights they can use to improve their security posture. Additionally, its innovative Singularity Hologram tool can be deployed inside a network to trick malicious actors into revealing themselves by luring them into attacking a false target.
Earlier this year, SentinelOne launched Purple AI, an AI-powered chatbot designed to integrate with its entire platform. It decreases alert fatigue, which means reducing the number of incidents left uninvestigated. Purple AI is capable of putting together comprehensive incident reports for managers to save them hours they'd otherwise spend manually digging into the root cause. Plus, the chatbot can be prompted to scan assets for new threats whenever they arise.
SentinelOne continues to grow faster than its competitors
Like most tech companies, SentinelOne has faced challenges over the past year because of a deteriorating economic climate. Elevated inflation and rising interest rates forced businesses to manage their spending carefully, even on critical cybersecurity software.
Nonetheless, in the recent fiscal 2024 third quarter, SentinelOne's revenue grew by an impressive 42% year over year to $164 million. It was a much faster growth rate than two of the company's main competitors achieved over the same period. CrowdStrike grew its revenue by 35% and Palo Alto Networks by 20%.
To be clear, CrowdStrike and Palo Alto are much larger organizations than SentinelOne, so it's harder for them to grow at the same pace. However, the recent results indicate that SentinelOne is taking market share.
SentinelOne's strong Q3 result also prompted the company to increase its full-year revenue forecast by $11 million to $616 million. That's even more impressive when you consider SentinelOne has reigned in its own spending to improve its bottom-line losses. The company's net loss fell by 29% year over year during Q3 to $70.3 million.
That's an important step on SentinelOne's path to profitability, and it's encouraging that the company can maintain strong growth while increasing its spending on research and development and marketing at a slowing pace.
Why SentinelOne stock is a buy right now
Research firm McKinsey & Company estimates the damage caused by cyberattacks will top $10.5 trillion annually by 2025. The firm says the corporate sector should be guarding against those threats by investing a collective $2 trillion in cybersecurity software annually. However, corporations are on track to spend only $189 billion in 2023.
As the damage bill grows, that spending gap will close, and SentinelOne is in a prime position to benefit. The company just launched a new strategic advisory service called Pinnacle One, designed to help large enterprises and governments build modern cybersecurity programs. SentinelOne's experts will coach corporate executives and world leaders on navigating the most severe cyber risks, including those stemming from the growing number of geopolitical conflicts worldwide.
Pinnacle One is a powerful service offering that could drive adoption of Singularity and other SentinelOne products inside the world's largest organizations.
Despite the 20% pop in SentinelOne stock following its positive Q3 earnings report, it's still trading 69% below its all-time high. The broader economic challenges have impacted the valuation investors are willing to pay for growth stocks. Still, inflation and interest rates are certainly looking more favorable now, so sentiment should improve going forward.
As of this writing, an investment of $100 will buy four SentinelOne shares. Given the scope of the company's opportunity in the cybersecurity space, investors could yield fantastic gains from here over the next 10 years (and beyond).
