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After the historic computer outage last year with global implications and one that impacted 8.5 million computers, Crowdstrike, the firm whose software was behind the disruption, is bleeding market share to rivals, according to Wells Fargo. In an analyst note released earlier today, Wells Fargo upgraded cybersecurity firm SentinelOne to Overweight from Equal-weight and bumped up its share price target by 53% to $29 from an earlier $19.
The bank highlighted its belief that SentinelOne is gaining market share over CrowdStrike, which has come under sharp criticism since the outage from firms like Delta Airlines that had to face wide scale disruption to their operations in the wake of a faulty software update that affected computers running Microsoft's Windows operating system.
SentinelOne Finds Favor From Wells Fargo Amidst Strong Ratings From Resellers & Expected Profitability
Wells Fargo's SentinelOne upgrade comes from its increased enterprise value to sales (EV/Sales) multiple. The new EV/Sales multiple for SentinelOne is 8x, which translates into a share price target of $29. This upgrade is based on the firm's ability to capture share from CrowdStrike after its July outage, with the bank believing that the market share gain is already taking place.
SentinelOne is among the cybersecurity firms that have benefited from the growing interest in artificial intelligence from cybersecurity customers. Its Singularity Platform has been thrown into the spotlight as a result, and accounted for 40% of the overall revenue during the latest quarterly results after marking 100% annual growth.
Like AI semiconductor designer NVIDIA, whose data center business is now its bread and butter, the popularity of Singularity, driven by AI, could also see it surpass SentinelOne's largest business, its endpoint platform, in the near future.
The key factor driving Wells Fargo's upgrade is its retailer survey, which, according to the bank, has results that "only happened once over the last three years in 2Q22(Jul)." This came in the form of SentinelOne beating Crowdstrike by marking a 29% quarter over quarter growth while CrowdStrike struggled with a negative 9% net.
Crucially, 32% of those surveyed shared that SentinelOne appears to be gaining market share over CrowdStrike, with 52% waiting on the sidelines for more data. However, Wells Fargo believes that these customers appear to be " taking a rational approach" and could present another opportunity for SentinelOne.
The apparent market share growth is also driven by SentinelOne's strategies as opposed to a pure play interest in its AI cybersecurity offerings. It began "began offering these discounts after the global outage," outlined analyst Nowinksi.
Wells Fargo's upgrade is the latest in the set of bullishness from Wall Street for SentinelOne. Morgan Stanley had upgraded its share price target to $29 last week, as part of its enthusiasm surrounding artificial intelligence.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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