The world economy has gone online; there is no turning back from this fact. The only question is how you can profit from this transition. Because more players have become dependent on cybersecurity, the World Economic Forum (WEF) is slowly making this an important theme. Today, you can get ahead of the curb by investing with Wall Street's giants, exposing your portfolio to the best growth story in cybersecurity stocks.
During the past few quarters, names like Check Point Software (NASDAQ: CHKP) and Fortinet Inc. (NASDAQ: FTNT) were perfect ways to break past all-time highs. Unfortunately, that growth can't be carried over to today. That's why portfolio managers at The Goldman Sachs Group Inc. (NYSE: GS) are quietly buying SentinelOne Inc. (NYSE: S) instead.
Of course, this stock can't operate alone. Artificial Intelligence and proper hardware play a significant role in enabling cybersecurity capabilities. Despite this, you will see that markets and institutions still prefer SentinelOne to names like C3.ai Inc. (NYSE: AI) and Dell Technologies Inc. (NYSE: DELL).
The Industry is Getting Hot
Professional traders, like those at Goldman that chose SentinelOne stock, typically follow a process when finding opportunities. Part of this process is called "top-down" analysis, where you look to understand the macro environment before you dig down to individual stocks and sectors.
It's supposed to sound complicated, but it can be as simple as following the trends in the ISM PMI indices. Starting with manufacturing data, the computer industry starts to become interesting.
With a particular focus on the computer and electronic products industry, here's what you will find. After contracting in December and January, February was a pivotal month of expansion, and this trend is likely to continue into the next quarter.
That takes care of the demand for hardware, which helped names like Dell break to new all-time highs and even call for analyst upgrades. But what about the technology side of the equation? This is where the services PMI comes in handy.
After contracting in December and January, the information industry saw a sudden expansion in February. Signaling a bottoming of the sector can lay the foundation for bullish times ahead in SentinelOne stock.
With all the hype in technology stocks today, you can see how the spillover effect has yet to reach into stocks like SentinelOne. However, some on Wall Street are quietly making their bets before Main Street realizes how much upside there could be.
First, earnings per share (EPS) growth is front and center. Some argue that NVIDIA's rise has already priced in its EPS growth projections of only 9% for the next twelve months. That makes SentinelOne's 300% projections all the more attractive.
Second, you must gauge how the market feels about these projections. The saying, "It must be expensive for a reason," applies here.
SentinelOne Stock: An Easy Buy Today
Both the Vanguard Group and Goldman Sachs bought into the stock this month. Upping its stake by 2.1%, Vanguard's global investment strategy likes how SentinelOne looks for the coming months. Goldman Sachs went in a little heavier, with a 5.7% addition to their investment.
Most recently, Sylebra Capital LLC recently bought 3.8 million shares of SentinelOne. A multi-million dollar investment ahead of a quarterly earnings announcement says a lot; a big rally could be in the making.
These sharks buy stocks with at least double-digit upside potential. Analysts at Bank of America Co. (NYSE: BAC) see the stock going as high as $35 a share, 24% higher than where it trades today. Likewise, Guggenheim analysts see it going to $32 a share for a 13% upside.
SentinelOne stock trades at a forward price-to-earnings (forward P/E) ratio of 100x, a massive premium of 600% to Dell. In fact, the entire industry trades at an average valuation of 25x, making SentinelOne "expensive."
There must be a reason why the market is willing to overpay for this name, and now you know some of it. In its last quarter, SentinelOne stock saw revenue growth of 42% year over year, a trend that is likely to accelerate now that the industry gets heated up again.
