SentinelOne's Stock Down 14% on Earnings Miss

31 May

SentinelOne's stock (NYSE: S) fell 14% following its mixed first-quarter financial results, which reported quarterly losses of 23 cents per share, significantly missing the analyst consensus estimate of losses of 5 cents by 360%. However, the company posted quarterly sales of $186.4 million, surpassing the analyst consensus estimate of $181.09 million by 2.93%.

Despite the bad earnings number, SentinelOne (NYSE: S) had some positive news to report as well. Sales that exceeded expectations actually soared 40% year over year. Gross profit margins jumped 5 full percentage points to 73%, and operating profit margins weren't exactly "profitable," but their negativity was cut in half, to 43%.

SentinelOne's (NYSE: S) first quarter of positive free cash flow (FCF) generated real cash profits of $41.1 million worth in just the first quarter, implying full-year FCF might be as high as $160 million. This makes SentinelOne (NYSE: S) a buy if the company can keep growing revenue at 40% and increase FCF at a similar pace.

On a $5.2 billion market capitalization, this implies the stock could currently cost as little as 32 times annual FCF, which seems a good price if the company can keep growing revenue at 40% and increase FCF at a similar pace. However, other investors might have been spooked by the company's forecast. Management said that second-quarter revenue will only be about $197 million, so better than the first quarter but slightly below Wall Street estimates. Full-year guidance came in short of Street expectations, with SentinelOne (NYSE: S) also noting that its GAAP earnings will remain negative all year long.

SentinelOne (NYSE: S) is technically oversold with a Relative Strength Index (RSI) of 21.31. The daily price chart depicts a down gap which occurred as a result of the earnings miss. But, investors are trying to fill in the downward gap formed.