What Happened:
Shares of cyber security company SentinelOne (NYSE:S) jumped 6.34% in the morning session after a Reuters report stated that the company is considering strategic alternatives, including a sale. The report added that the cybersecurity company has enlisted Qatalyst Partners, an investment bank, to facilitate discussions with potential acquirers. While initial interest has been expressed, SentinelOne's valuation expectations still need to be met, raising the possibility that discussions might conclude without a deal, Reuters added.
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What is the market telling us:
SentinelOne's shares are very volatile and over the last year have had 44 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 34.9% on the news that the company reported first-quarter results that missed analysts' revenue estimates. Earnings per share (EPS) beat. However, the company continued to burn cash. Guidance was also weak. Revenue guidance for the next quarter was below Consensus. Full year guidance revenue was lowered and also came in below expectations. Lowering guidance is always a worrisome sign, and the company reducing full year revenue guidance by more than 6% is also a meaningful magnitude.
Additionally, operating margin guidance was maintained on the lower revenues; it would have been much more comforting had margins increased, showing that the company was perhaps prioritizing profits and efficiency over growth at all costs. Management called out a difficult macro backdrop and acknowledged that the quarter was a "tough" one.
The overall results and commentary were weak, with the topline miss and underwhelming guidance providing little reason to be optimistic.
SentinelOne is up 14.6% since the beginning of the year, but at $16.71 per share it is still trading 43% below its 52-week high of $29.33 from September 2022. Investors who bought $1,000 worth of SentinelOne's shares at the IPO in June 2021 would now be looking at an investment worth $392.82.
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