SentinelOne’s 101% revenue growth outperforms CrowdStrike

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The attempt to protect corporate computer networks at their endpoints – such as laptops and smartphones – from cyberattacks is large, growing modestly, and is overflowing with competitors.

Corresponding Fortune business insights, the endpoint security industry is expected to grow at an average annual rate of 8.3% from $ 14 billion in 2021 to approximately $ 25 billion in 2028. In its August 21 report, 33 competitors are featured.

Two of these competitors – SentinelOne, based in Mountain View, California, and CrowdStrike, based in Sunnyvale, California – have argued publicly for years. As I wrote in June 2019, SentinelOne was critical of Crowdstrike’s products and did so again this month. In July, Crowdstrike accused SentinelOne of setting its prices so low that it cannot make a profit, according to the CRN.

Now that both are publicly traded (with SentinelOne going public in June), it’s clear that SentinelOne is growing twice as fast, but CrowdStrike is five times bigger.

I think SentinelOne stock has more upside potential. How come? While both companies are receiving very positive feedback from customers and investing in future growth, SentinelOne is ahead for two reasons:

  • It grows faster
  • His product fends off more cyberattacks before they break into a company’s network

(I have no financial interest in the securities mentioned).

Financial performance and prospects: Advantage SentinelOne

Investors like companies that exceed growth expectations and raise forecasts – ideally for sales and profits. When a company isn’t in danger of burning its money, investors often place more emphasis on revenue growth than on losses.

In this regard, both SentinelOne and Cr0wdStrike did well. However, SentinelOne is growing much faster – albeit from a much smaller base.

In its most recent financial report, SentinelOne exceeded sales expectations but lost more money than expected. Very rapid sales growth is also forecast for the current quarter.

How come? For the three months ended July 31, SentinelOne revenue rose 121% to $ 45.8 million, about $ 6 million more than analysts forecast.

SentinelOne has also raised its sales forecast for the end of October. It expects revenue to grow 101% to $ 49.5 million – about $ 9 million more than analysts expected, according to CRN.

Meanwhile, the net loss of $ 46 million was about 116% worse than last year, and the net loss per share of 62 cents was a whopping 42 cents below analyst consensus.

Nevertheless, the company is in solid financial shape. While its business consumed $ 42 million in cash, SentinelOne ended the quarter with $ 1.7 billion on its balance sheet.

CrowdStrike – which is roughly 7.3 times the size of SentinelOne – reported above-expected growth in revenue and earnings per share, while guidance for the quarter ending October suggests a significant slowdown in growth.

Crowdstrike’s total revenue soared 70% to $ 337.7 million in the second quarter – over $ 24 million more than analysts expected, while non-GAAP earnings per share of 11 cents per share, according to ZDNet was above consensus.

For the third quarter, Crowdstrike expects total revenues in the range of $ 358 million to $ 365.3 million – the median is 56% above the results of the third quarter of 2020.

Crowdstrike was happy with the results. CEO George Kurtz said, “CrowdStrike had an excellent second quarter with rapid subscription revenue growth and a record net new ARR for the quarter. The success of our platform strategy and our growing branding have resulted in more and more customers turning to CrowdStrike as their trusted security platform. “

Customer value proposition: Both very strong

The customers give both companies good marks.

According to Gartner Peer Insights, CrowdStrike gave the Falcon endpoint security company a 4.9 / 5 star rating from 757 customers. A five-star rating recognized the company’s responsive service and thorough concept demonstration. A critical review found that the “CrowdStrike support team felt their product was so good that it …

SentinelOne’s Singularity platform received 4.8 / 5 stars out of 342 reviews. A positive review praised the SentinelOne team, stating that “it was just incredible in terms of sales, customer service, product quality and technical support.” A less positive rating complained about the need for updates that “require significant changes in the company”.

SentinelOne argued that CrowdStrike’s product does not do enough to preventively stop cyberattacks. In June 2019, Weingarten said that SentinelOne won the competition against CrowdStrike and others because its technology is “more effective and efficient. Others let you see something is happening and send you to an analyst. We have an advantage without human intervention. “

Earlier this month, Weingarten again claimed that customers prefer the first approach to prevention. As he told CRN: “[We recently won over a multi-million dollar customer that was] increasingly frustrated with the need to keep putting out fires. And if you take a more preventive approach, you can even prevent these fires. ”

SentinelOne says its solution reduces customer pain. As Weingarten told me in an interview on Sept. 17, “We are providing a shift in detection and response – which requires costly human intervention to correct. Our artificial intelligence fends off more attacks [than do rival products]. “

In July, CrowdStrike praised SentinelOne for its low prices. As noted by CRN, Kurtz said SentinelOne “buys growth”. [to impress investors]. At some point you have to reverse the losses and start generating money. “

Weingarten pushed back, noting that SentinelOne’s technology “costs as much or more than competing products. [Unlike CrowdStrike,] We’re not trying to abuse a customer’s security budget by forcing them to buy tons of service hours to support a non-automated product, ”he told CRN.

New product initiatives: Both very strong

SentinelOne and CrowdStrike invest in future growth opportunities.

As Weingarten told me on September 17th: “We are constantly innovating – we release two new modules every quarter. We listen to customers: what do they need? What can we solve for? ”

The analysis of company data offers SentinelOne a great opportunity. As he said, “We acquired a data analytics company. It enables companies to gain insights into many use cases from their data – for example logs that must be kept for regulatory purposes. This is our Ranger product that maps everything on a corporate network and automatically deploys and deploys software to the most common source of security breaches – e. B. previously unknown or leftover devices that can access the network. There are many companies that do this. But unlike Microsoft’s product, which is cumbersome to use, ours is easy to consume and activate. “

In its latest earnings announcement, CrowdStrike highlighted its new products, including “Falcon X Recon +, a new managed solution that simplifies the process of hunting and countering external threats to brands, employees and sensitive data,” the press release said.

CrowdStrike sees Falcon as the wave of the future. As Kurtz said, “We believe that our Falcon extensible platform, specifically designed to harness the power of the cloud, collect data once and reuse it many times, is a fundamental cornerstone for building a sustainable growth business over the long term. “

It remains to be seen how much additional income these investments will bring to companies.

Customer satisfaction: Slight advantage for SentinelOne

Both companies have won new customers and sold more products to their existing ones.

SentinelOne reported that the total number of customers increased by more than 75% to over 5,400 customers as of July 31, 2021, ”stated its latest earnings report.

CrowdStrike added customers a little faster. It told investors that for the quarter it added “1,660 net new subscribers for a total of 13,080 subscription customers as of July 31, 2021, a growth of 81%”.

SentinelOne takes care of customers after the sale. “Satisfied customers stay longer. We have a Net Promoter Score (NPS) of 70 – the highest for us and in the industry. We have a gross retention rate of 97% – which means most of our customers stay with us. And those customers buy more over time – as evidenced by our 129% net retention rate. We work closely with our customers to become a trusted partner and we work with a network of vendors to add features that customers need [which the partners can do better than us],” he said.

CrowdStrike also reports strong gross and net retention rates of 97.6% and 124.8%, respectively, according to its company overview from August 2021. I couldn’t find the latest NPS.

Put simply, both companies are adding customers and selling more to existing ones – SentinelOne’s net retention rate is slightly higher than CrowdStrike’s.

SentinelOne advantage

SentinelOne stock is up 63% since it went public in June. That’s far more compelling than CrowdStrike, whose stocks have risen a more modest 5% since then and are up 32% so far in 2021.

My guess is that it depends on the expected sales growth. While SentinelOne expects growth of 101% for the current quarter, CrowdStrike is forecasting more modest revenue growth of 56%.

To be fair, as it grows, it becomes more difficult for a company to sustain triple-digit growth. In the first quarter of 2019, SentinelOne posted ARR growth of 217%, while CrowdStrike posted revenue growth of 109%. Since then. The growth rates of both companies have halved.

Unfortunately for CrowdStrike investors, Bank of America

BAC
Analyst Tal Liani expects its revenue growth to slow significantly from 60% in 2021 to 36% in 2022, according to Investor’s Business Daily.

So I think SentinelOne stock will continue to have more upside potential.

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