What Happened?
Shares of cybersecurity AI platform provider SentinelOne (NYSE: S) fell 13.1% in the afternoon session after the company's fourth-quarter revenue guidance overshadowed its third-quarter earnings beat.
While the company topped Wall Street's expectations for the third quarter, reporting revenue of $258.9 million and an adjusted profit of $0.07 per share, its outlook for the upcoming quarter raised concerns among investors. SentinelOne projected its fourth-quarter revenue would be $271 million, which fell below the $273.2 million analysts had predicted. This weaker-than-expected forecast suggested a potential slowdown in growth, prompting a negative reaction in the market despite the otherwise solid quarterly performance. The guidance miss was the key factor driving the stock's decline.
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What Is The Market Telling Us
SentinelOne’s shares are quite volatile and have had 16 moves greater than 5% over the last year. But moves this big are rare even for SentinelOne and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 15 days ago when the stock dropped 2.6% on the news that markets faded the Nvidia rally in the morning session, as investors remained uncertain about future rate cuts.
While the trading day began with significant enthusiasm, pushing the Dow Jones Industrial Average up more than 700 points and the Nasdaq Composite up 2.6%, momentum quickly evaporated as the session wore on. The primary catalyst for this sharp reversal was a stronger-than-expected jobs report, which reduced the implied odds of a December interest rate cut to less than 40%. This macroeconomic anxiety overshadowed stellar corporate performance. Nvidia initially surged 5% on blockbuster earnings and CEO Jensen Huang's bullish outlook on "off the charts" demand for Blackwell chips. However, the stock eventually turned negative, acting as a heavy weight that dragged the broader indices into the red. The sell-off partly reflects a deepening caution regarding high-flying tech valuations in a "higher-for-longer" rate environment.
Consequently, investors appeared to rotate capital away from volatile growth sectors and toward defensive staples, evidenced by Walmart's 6% gain following its own earnings beat. Ultimately, the market could not sustain the morning's euphoria, as traders prioritized rate realities over AI potential.
SentinelOne is down 35.2% since the beginning of the year, and at $14.63 per share, it is trading 43.3% below its 52-week high of $25.78 from December 2024. Investors who bought $1,000 worth of SentinelOne’s shares at the IPO in June 2021 would now be looking at an investment worth $344.12.
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