Shares of cybersecurity company SentinelOne (S 0.09%) surged on Monday because it's one of CrowdStrike's biggest rivals and CrowdStrike is struggling. As of 11:30 a.m. ET, SentinelOne stock was up 8% whereas CrowdStrike stock was down about 12%.
Why could this be good for SentinelOne?
According to Microsoft, an estimated 8.5 million Windows-based devices went down Friday after CrowdStrike's software update had a defect. Today, CrowdStrike stock is down as the analyst community sounds the alarm about the potential fallout. It's possible that businesses will be reluctant to sign contracts with the company right now, which would seemingly be an opportunity for SentinelOne.
For its part, CrowdStrike doesn't mention SentinelOne by name in its latest annual filing. But SentinelOne does mention CrowdStrike first among its competitors in the end-point security space. Since the two companies offer similar services in this area, it's logical to expect SentinelOne to get a new inflow of business leads because of CrowdStrike's misstep.
Keeping things in context
If CrowdStrike loses business because of the outage it caused -- and that's still an "if" at this point -- then it would seem reasonable to expect SentinelOne to pick up some easy wins in the near term. Businesses could forgo CrowdStrike if they want. But they can't forgo cybersecurity because the threats are only getting more frequent and sophisticated with time. In other words, there will be cybersecurity winners one way or another. And deals could start flowing more easily toward SentinelOne.
However, investors should remember that SentinelOne stock has dropped sharply twice in 2024. Both drops came immediately after it reported financial results. While growth is good (revenue was up 40% in the first quarter of 2024), analysts have expected more and management has even modestly revised its guidance down at times.
Therefore, it seems SentinelOne has been outcompeted at times. It might get easier from here with CrowdStrike's unforced error. But SentinelOne still has to capitalize on the opportunity with strong execution on its own part.
