One of the cybersecurity names that has drawn attention in recent years is SentinelOne (S +0.98%). Its artificial intelligence (AI)-driven approach has helped it stand out in the increasingly critical cybersecurity industry. Additionally, the company is small enough that outsized growth could theoretically make investors millionaires from a relatively modest investment.
However, mid-cap stocks that grow into the world's largest companies are a rare find, even for those with enough patience to weather a stock's downtrends. Furthermore, unforeseen circumstances often derail the growth of promising companies. Amid such challenges, investors hoping to become millionaires in SentinelOne stock should take a closer look before deciding whether this stock can help them achieve that goal.
The path to $1 million
So, could an investor buy $10,000 worth of SentinelOne stock and end up with $1 million? Admittedly, the path to such growth is plausible in theory. As of the time of this writing, SentinelOne has a $7.5 billion market capitalization, and a 100-fold increase would take it to $750 billion, far below the record market caps of today.
Still, only 13 companies trading on U.S. exchanges today have a higher market cap than $750 billion. Moreover, if one includes only pure-play cybersecurity companies, the largest company, Palo Alto Networks, has a market cap of only $136 billion.
That falls well short of the $750 billion threshold, though investors should also consider the industry growth rate. Fortune Business Insights valued the industry at $194 billion in 2024 and expects it to grow to $563 billion by 2032, a compound annual growth rate of 14%. That will likely keep SentinelOne on a growth trajectory as the size of its industry grows dramatically.
Unfortunately, this also means SentinelOne will have to compete with multiple providers to claim its share of the business. In addition to Palo Alto, CrowdStrike, Zscaler, and Okta are just some of its larger competitors. These companies have also integrated AI into their security products, so SentinelOne will have to continue innovating to attract additional business.
Will its financials help?
So far, finding new customers does not appear to be an issue. In the first nine months of 2024, SentinelOne's $596 million in revenue rose 33% compared to year-ago levels.
Unfortunately, that is not enough revenue to address SentinelOne's financial challenges. In the first three quarters of the year, operating expenses of $691 million exceeded its revenue, and it reported a net loss of $218 million during that period.
Indeed, plenty of stocks grow without being profitable, and SentinelOne's $660 million in liquidity could sustain the current pace of losses for approximately two more years. Nonetheless, stocks will suffer if profitability seems out of reach, and the operating expenses relative to revenue may leave investors wondering if the company can ever earn a positive net income.
NYSE: S
Key Data Points
SentinelOne has suffered, as the current stock price is well below the IPO price of $35 per share from 2021. While some investors may perceive the company's price-to-sales (P/S) ratio of 9 as inexpensive, its history could also make the stock cheap for a reason. Hence, it is unclear whether the stock will become a value trap or set up small investors to eventually become wealthy.
Will SentinelOne help you become a millionaire?
Amid current conditions, small investors should not expect to become millionaires from SentinelOne stock. Admittedly, if shareholders buy a company when it is a mid-cap, the right growth runway could take a relatively modest investment into the seven figures. Compared to other cybersecurity stocks, SentinelOne also trades at a relatively low valuation.
Unfortunately for SentinelOne shareholders, that level of growth tends to happen when companies dominate a growing industry that has become increasingly essential. Considering its large number of competitors, such a scenario is unlikely for SentinelOne.
Moreover, investors are less likely to tolerate losses if profitability seems out of reach. With operating expenses exceeding revenue levels, one has to wonder if the company can ever earn a positive net income.
Indeed, if SentinelOne can continue to foster a meaningful niche in AI-driven cybersecurity, the stock could eventually outperform the market. Still, even if that happens, its investors should not expect to become millionaires without investing significantly more than $10,000.
