DA Davidson reiterates SentinelOne stock rating on ARR concerns

DA Davidson maintained a Neutral rating and set a $20.00 price target for SentinelOne Inc (NYSE:S), despite the company's recent quarterly results. The cybersecurity firm delivered a beat-and-raise quarter, surpassing top-line expectations from the previous period. Over the past five quarters, net new annual recurring revenue has consistently beaten analyst estimates.

This strong performance has contributed to a remarkable stock surge, with shares increasing by 73% over six months and up 51% year-to-date. However, DA Davidson warns that net new annual recurring revenue trends remain lackluster, suggesting a potential slowdown in annual recurring revenue growth. The firm expects SentinelOne's shares to remain range-bound until the company establishes a hard floor on annual recurring revenue growth.

The $20 price target equates to approximately 30 times enterprise value to fiscal year 2028 free cash flow. Compared to its mid-teens growth software-as-a-service peers, which trade around 20 times the same metric, SentinelOne appears fairly valued, according to InvestingPro analysis. Analyst Rudy Kessinger at DA Davidson supports this Neutral rating on the stock.