Top AI Stock with Long-Term Potential: A Smart Investment for $25 Over the Next Decade

Top AI Stock with Long-Term Potential: A Smart Investment for  Over the Next Decade

Cybercrime will cost the world $9.5 trillion in 2024, according to an estimate from Cybersecurity Ventures. Additionally, data from McKinsey & Company suggests that the business sector is on track to spend just $213 billion on cybersecurity this year, which is well below the $2 trillion it is expected to spend.

Clearly, it is already more expensive on average for a company not have cyber protection. As the astronomical cost of cybercrime continues to rise, the aforementioned spending gap will likely close.

SentinelOne (NYSE:S) is ready to capitalize if this happens. It is a cybersecurity provider with artificial intelligence (AI) at the heart of its products, and the company continues to grow faster than its competitors. Here’s why investors might want to buy SentinelOne stock now and hold it for the long term.

Top AI Stock with Long-Term Potential: A Smart Investment for  Over the Next Decade

Image source: Getty Images.

A Leader in AI-Driven Cybersecurity

Cybersecurity giant Palo Alto Networks recently highlighted a tenfold increase in the frequency of phishing emails over the past 12 months. Attackers use Generative AI to quickly create realistic content designed to engage employees in sharing sensitive information about their organization.

A recent PwC survey confirms this. Of the 4,702 top CEOs who responded, 64% are most concerned about the cyber risks posed by generative AI. This fear goes beyond the spread of misinformation and even the potential reputational risks posed by the use of technology.

Automated cybersecurity tools are essential to fending off the barrage of AI-based attacks. SentinelOne’s Singularity is a holistic cloud, endpoint and identity protection platform with AI at its heart. The company’s unique scenario technology tracks security event data across the enterprise and autonomously creates summaries with actionable insights for managers. This reduces alert fatigue, which is a serious problem across the industry as security managers struggle to keep up with the sheer volume of incidents.

Purple AI from SentinelOne is another solution to this problem. It integrates with the cybersecurity stack and serves as an AI virtual assistant. It is able to answer questions, analyze specific issues on command, and even run preemptive scans for newly identified threats. Purple AI can save cybersecurity managers countless hours of manual investigative work, ensuring fewer incidents go overlooked.

SentinelOne is growing faster than its competitors

SentinelOne generated $174 million in revenue during the fiscal fourth quarter of 2024 (ended January 31), up 38% year over year. This is a faster growth rate than Palo Alto Networks (19%) and Crowd strike (33%) delivered during their last quarters. These are two of SentinelOne’s biggest rivals in AI-based cybersecurity.

That said, SentinelOne is a much smaller company, making it easier to generate higher growth rates. It reported revenue of $621 million for fiscal 2024, which was significantly higher than management’s most recent guidance. However, Palo Alto generated $7.5 billion in revenue over the last 12 months, and Crowd strike generated $3.1 billion in its recently completed fiscal year.

The other caveat concerns the SentinelOne results. The company generated a net loss of $339 million in fiscal 2024, although that figure fell to $81 million on a non-GAAP basis, which excludes one-time, non-cash expenses like employee compensation. basis of actions. Palo Alto and CrowdStrike are profitable on both a GAAP and non-GAAP basis given that they are much larger companies and have achieved large scale.

Operating at a loss means SentinelOne invests more heavily in growth initiatives than its competitors relative to its revenue. This isn’t a near-term problem, as the company has $926 million in cash and short-term investments on its balance sheet, allowing it to sustain its losses for a few more years. But ultimately, SentinelOne will have to prove to investors that it can generate profits.

Why SentinelOne is a Buy Now

SentinelOne stock is trading 71% below its all-time high, which was set during the tech frenzy of 2021 when investors assigned it an unrealistic valuation. Based on its fiscal 2024 revenue of $621 million and current market cap of $6.6 billion, SentinelOne shares change hands at a price-to-sales (P/S) ratio. 10.6 at present.

For comparison, CrowdStrike stock trades at a P/S ratio of 26.6, making it 2.5 times more expensive. Palo Alto trades at a P/S ratio of 13.4, so it’s also more expensive than SentinelOne, despite SentinelOne’s revenue growth being twice as fast.

Investors who buy SentinelOne stock now and hold them for the next 10 years might be glad they did when they look back on this moment. This decade should give the industry enough time to close the $1.8 trillion spending gap, and it will also give the business sector enough time to convert their fears around generative AI into concrete investments in cybersecurity.

Should you invest $1,000 in SentinelOne right now?

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Anthony DiPizio has no position in any of the stocks mentioned. The Motley Fool ranks and recommends CrowdStrike and Palo Alto Networks. The Motley Fool has a disclosure policy.

1 single stock of artificial intelligence (AI) to buy with $25 and hold for 10 years was originally published by The Motley Fool

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