On Thursday, Bernstein, a prominent financial firm, increased the price target for SentinelOne Inc (NYNYSE:SE:S) to $37.00, up from the previous $34.00. The firm continues to endorse the stock with an Outperform rating. The adjustment reflects the analyst's confidence in the company's near-term revenue growth and future financial performance.
SentinelOne has demonstrated resilience with negligible customer churn, and the firm expects that the impact of macroeconomic headwinds on renewals, which are currently subsiding, will further improve the demand environment. The analyst projects that the company's net retention rate (NRR) will stabilize shortly and anticipates a recovery of approximately 300 to 400 basis points by the end of 2025.
The company's strategy for growth includes a significant opportunity for upselling and cross-selling to existing customers. This approach, combined with consistent acquisition of new customers, is expected to sustain a mid-to-high 30% revenue growth rate through the fiscal year 2027. The anticipated revenue increase is likely to result in financial leverage and a free cash flow (FCF) margin approaching 20% around the same year.
Bernstein's valuation model employs a blend of a multiples regression, which estimates a 12x Price to Next Twelve Months (NTM) revenue, and a discounted cash flow (DCF) analysis. The DCF assumes a terminal revenue of $5 billion with a 3% growth rate. These calculations underpin the revised one-year price target of $37 for SentinelOne shares.
The firm's outlook for SentinelOne is based on a combination of the company's strong performance metrics and a favorable market environment projected for the coming years.
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