Cybersecurity Stocks: 1 Immediate Buy and 1 Dip Opportunity

December 24, 2024 at 08:15 AM EST

SentinelOne cybersecurity locks

Cybersecurity is a broad industry in the computer and technology sector that is comprised of many types of firms targeting different aspects of online protection. Just as home security can encompass surveillance cameras and alarm systems to panic rooms and fireproof safes, cybersecurity can entail endpoint and events monitoring to backup and data protection. Here are two cybersecurity stocks with different reactions to their earnings to present buying opportunities now and on deeper pullbacks.

SentinelOne: Protecting the Endpoints With AI

In terms of computing and cybersecurity, endpoints refer to the devices that provide access to a network that can send and receive data. Endpoints can range from desktops, laptops, and mobile devices to server and virtual machines. Hackers target endpoints to gain unauthorized access to a network and its data. SentinelOne Inc. (NYSE: S) specializes in artificial intelligence (AI)-powered autonomous endpoint protection through its Singularity Platform. It provides granular endpoint management, enabling administrators to monitor, secure, and manage devices effectively. Its AI and ML algorithms continuously learn and adapt to evolving cyber threats.

The CrowdStrike Surge That Wasn’t

SentinelOne was expected to be a major benefactor from the CrowdStrike Holdings Inc. (NASDAQ: CRWD) incident that occurred in July 2024. A software update pushed out by the company caused a widespread Microsoft Co. (NASDAQ: MSFT) Windows outage across 8.5 million devices, causing an estimated $5.4 billion in damages, including the grounding of over 700 United Airlines Holdings Inc. (NASDAQ: UAL) flights. The incident sent SentinelOne shares higher in anticipation of the mass exodus of CrowdStrike’s customers. Unfortunately for SentinelOne, that didn’t materialize, at least in Q3.

SentinelOne Misses By a Penny

For the fiscal third quarter of 2025, SentinelOne reported EPS of breakeven, which missed consensus estimates by a penny. Revenues grew 28.3% YoY to $210.6 million, beating consensus estimates of $209.73 million. Annualized recurring revenue rose 29% YoY to $859.7 million. GAAP gross margin expanded 140 bps to 74.7%. However, operating losses also grew 9.4% YoY to $89.1 million, and R&D expenses grew by 34.7% YoY to $70.4 million. There is a possibility that SentinelOne gained new customers from CrowdStrike, but the transition to their platform could take several quarters to become material. Customers with ARR over $100,000 rose 24% to 1,310. The company ended the quarter with $1.1 billion In cash and investments.

Positive FCF Causes SentinelOne to Issue Upside Guidance

The company delivered positive free cash flow for the first time on a trailing twelve-month basis, triggering SentinelOne to raise revenue growth outlook to 32% YoY for fiscal 2025.

SentinelOne issued upside FQ4 revenue guidance of $222 million versus $220.63 million consensus estimates.

Fiscal full-year 2025 revenue guidance is expected to be around $818 million, beating $815.65 million consensus estimates. Incidentally, the market reacted by selling off shares 13.2% the following day to close at $24.89. The sell-off continued for several weeks, hitting a low of $21.55, presenting an immediate buying opportunity for bullish investors.

Rubrik: Protecting the Data Ecosystem

If SentinelOne is the equivalent of a home surveillance system, then Rubrik Inc. (NYSE: RBRK) is the equivalent of a heavy-duty bank vault that protects the valuables.

The valuables, in this case, are data. Rubrik provides comprehensive data protection, management, and immutable backup services with its unique zero-trust architecture.

They specialize in cyber resilience, data archiving, recovery, and threat monitoring through its Rubrik Security Cloud platform.

Rubrik Is in Hypergrowth Mode as a Newly Minted Publicly Listed Company

Rubrik recently became a public company in April of 2024, with the stock falling to a low of $28.34 on June 17, 2024. Its recent fiscal third quarter 2025 earnings report dazzled investors and analysts, rocketing shares up to a new high of $75.79 before a pullback towards the $62.06 gap fill. The company reported a FQ3 loss of 21 cents per share, which still crushed consensus estimates by 19 cents. Revenues surged 42.6% YoY to $236.2 million, firmly beating consensus estimates of $217.5 million. Its Subscription ARR surged 38% YoY to just over $1 billion. Subscription revenue jumped 55% YoY to $221.5 million. The company ended the quarter with $632 million in cash and short-term investments.

The Growth Continues With Upside Guidance

According to consensus estimates, Rubrik expects FQ4 EPS to lose 41 cents to 37 cents versus a low of 41 cents. Revenue is expected between $231.5 million to $233.5 million versus $224.47 million consensus estimates. Fiscal full-year 2025 revenues are expected to be between $860 million and $862 million versus $834.12 million. Non-GAAP EPS loss is expected to be between $1.96 and $1.82. Rubrik partnered with flash array data storage leader Pure Storage Inc. (NYSE: PSTG) to offer companies a complete cyber resilience solution comprised of Rubrik’s Security Cloud and Pure Storage’s FlashArrayTM and FlashBlade.

Cyber Resilience Is Driving Growth

Rubrik CEO Bipul Sinha stated that cyber resilience is the number one topic in cybersecurity. Enterprises are accepting the inevitability of cyberattacks and breaches occurring. What matters the most is the ability to be resilient against attacks as well as have the capability to recover fast. Rubrik claims to deliver the fastest cyber recovery for its customers.

CEO Sinha stated, “We are the only vendor in the market that combines fast cyber recovery with data security posture management, or DSPM. We believe DSPM plus cyber recovery is the only way to deliver complete cyber resilience. In summary, enterprises are turning to Rubrik as their trusted cyber resilience partner because we can confidently meet the cyber recovery time objective or RTO.” Pullbacks on Rubrik stock back to the lower gap fill level at $54.90 present a solid pullback opportunity for bullish investors.

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