What Happened:
Shares of cyber security company SentinelOne (NYSE:S) jumped 9.2% in the pre-market session as stocks of cybersecurity software companies soared after a global technology outage. The outage was caused by a faulty update deployed by CrowdStrike to computers running the Microsoft Windows operating system. CrowdStrike has clarified that the issue wasn't caused by a "security incident or cyberattack." CEO George Kurtz noted on the social media platform X (formerly called Twitter) that "the issue has been identified, isolated, and a fix has been deployed."
However, the issue had far-reaching consequences, affecting systems in industries delivering critical services, including hospitals, banks, and airports. CRWD stock's decline suggests markets might be struggling to understand the long-term implications of the issue, especially as it relates to CrowdStrike maintaining its dominance in the highly competitive cybersecurity space, which often permits little to no room for mistakes.
Wedbush analyst Dan Ives provided insights on how this might play out, adding, "It could create opportunity for some competitive displacements, but this will take time to determine the path of CIOs and companies looking ahead and related legal actions related to this outage." After the initial pop the shares cooled down to $20.87, up 3.7% from previous close.
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What is the market telling us:
SentinelOne's shares are quite volatile and over the last year have had 22 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 previous big move we wrote about was 4 days ago, when the company gained 5.3% on the news that Baird analysts Shrenik Kothari and Zachary Schneider initiated coverage on the stock and assigned an Outperform (Buy) rating with a price target of $25. The price target implied a potential 15% upside from where shares traded when the upgrade was announced.
The analysts cited the reason for the bullish rating, adding, "With a strategic focus on cloud security, IoT protection, and AI-driven analytics, SentinelOne remains at the forefront of cybersecurity innovation." Commenting on the near term potential, the analysts stated "We believe it's poised for continued growth/profitability with platform fueling 40% of 1Q'25 bookings, and cloud/data driving cross-selling opportunities."
SentinelOne is down 19.1% since the beginning of the year, and at $20.87 per share it is trading 30.4% below its 52-week high of $30 from February 2024. Investors who bought $1,000 worth of SentinelOne's shares at the IPO in June 2021 would now be looking at an investment worth $492.47.
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