We are experiencing some temporary issues. The market data on this page is currently delayed. Please bear with us as we address this and restore your personalized lists.
Better Artificial Intelligence Stock: CrowdStrike Holdings vs. SentinelOne
Today's cyber threats are sophisticated and more challenging to detect than ever. Traditional antivirus software doesn't keep your computer as safe as it once did. This mismatch has paved the way for up-and-coming companies like CrowdStrike Holdings(NASDAQ: CRWD) and SentinelOne(NYSE: S) to thrive, as they bring new-age technology to the table.
These companies protect some of the world's largest corporations, are rapidly growing, and are taking market share from dated competitors.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free ?
The secret? Both leverage AI technology to respond to and evolve in the face of new threats in real time. Both companies have the makings of promising long-term tech stocks, but one has an edge as the better AI stock to buy today.
Here is what you need to know.
AI powers two exceptional security platforms
CrowdStrike and SentinelOne specialize in endpoint protection, which means they secure any virtual or physical device connected to a network, such as a laptop, tablet, mobile phone, etc. However, each company has steadily evolved beyond endpoint security to grow, pushing into new niches within cybersecurity like cloud and identity security.
Traditional antivirus programs log known threats and then monitor a device for them. Naturally, they are blind to threats they aren't familiar with. CrowdStrike and SentinelOne monitor everything happening within a device, using AI to analyze patterns and behaviors to find things that don't belong. This leads to faster threat responses and even proactive protection against threats they haven't seen before.
Both companies score resoundingly well in third-party security evaluations. Prestigious IT firm Gartner has rated CrowdStrike a leader in endpoint security for five consecutive years, and SentinelOne is on a four-year streak of its own. CrowdStrike and SentinelOne have garnished virtually identical ratings on Gartner's Peer Insights program, with respective average ratings of 4.8 and 4.7 out of 5, each based on over 1,500 reviews.
Is one better poised to be than the other in the future? Maybe, though, it would probably be splitting hairs to say so. Yet taking a look back, it'd seem as if one has had a big advantage.
There are three reasons why CrowdStrike has been the better stock so far
Despite their similarities, each company's stock has performed wildly differently:
CRWD Chart
SentinelOne has dramatically lagged CrowdStrike for a few reasons.
First, CrowdStrike is much larger. The company has generated $3.5 billion in revenue over the past four quarters to SentinelOne's $723 million. There is little doubt that CrowdStrike has far more market share today, which somewhat labels a smaller peer like SentinelOne as an underdog.
Second, CrowdStrike has been far more profitable than SentinelOne. CrowdStrike converts nearly 30% of its revenue to free cash flow and is GAAP profitable. SentinelOne only recently became free-cash-flow positive and is still losing money on a GAAP basis.
Lastly, SentinelOne went public in the summer of 2021, near the peak of the "Everything Bubble" caused by zero-percent interest rates. At its peak, SentinelOne traded at a blistering enterprise value-to-sales ratio of more than 120. This unsustainable valuation has steadily eroded over the past three years due to revenue growth and share price declines.
In summary, SentinelOne had inferior fundamentals and was way too expensive. The stock's poor performance makes total sense.
But that could change -- here is why SentinelOne is the better buy today
The stock that once traded at an enterprise value-to-sales ratio of more than 120 trades at a fraction of that today. SentinelOne's valuation is now half of CrowdStrike's:
S EV to Revenues Chart
That seems fair based on events to this point, but SentinelOne has enough going for it that it may start to close that gap.
The company is marching toward profitability as revenue grows. It is well funded, with $708 million and zero debt, which it can use to invest in marketing, product development, and acquisitions. SentinelOne recently landed a blockbuster deal with Lenovo to provide security software on its PCs, which should help it maintain its robust growth.
I'll give CrowdStrike credit; the company grew revenue almost as fast as SentinelOne last quarter despite working on a much larger base number. However, CrowdStrike caused a historic IT outage over the summer. It's fair to wonder whether SentinelOne and others can steal some business from CrowdStrike as customer contracts expire. Only time will tell. But between this, the Lenovo deal, and SentinelOne's smaller size, I like the underdog's odds of growing faster for longer.
As SentinelOne grows and its financials improve, look for the stock to earn a higher valuation and have a turn as the better-performing stock. SentinelOne is my AI stock pick moving forward.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,292!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,169!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $407,758!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Justin Pope has positions in SentinelOne. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
