SentinelOne, Inc. (S): A Bear Case Theory

We came across a bearish thesis on SentinelOne, Inc. (S) on Deep Value Returns’ Substack. In this article, we will summarize the bears’ thesis on S. SentinelOne, Inc. (S)'s share was trading at $17.39 as of 29^th May. S’s forward P/E was 89.29, according to Yahoo Finance.

The author openly admitted to a mistake in owning and recommending SentinelOne (S), acknowledging that the company failed to meet the high-growth expectations originally anticipated. SentinelOne, a cybersecurity firm leveraging AI to protect businesses, has struggled to compete with larger peers like CrowdStrike, especially after some sales setbacks and customer hesitation amid economic uncertainty.

Despite the company’s clean balance sheet and growing free cash flow—35% year-over-year growth in Q1 2026 with a target of $100 million soon—the author highlighted that slowing revenue growth and management’s withdrawal of revenue guidance are red flags for a growth stock, undermining its high valuation at 60x forward free cash flow.

While profitability improvements and wins in large contracts offer some hope, the author stressed that the stock’s limited upside and increasing risks do not justify continued conviction. Ultimately, the author took full responsibility for holding onto the stock too long, admitting that optimism clouded judgment and that this did not fit the profile of a true high-growth investment.

The recommendation was to sell SentinelOne (S), emphasizing the importance of conviction-driven decisions and cutting losses when a thesis no longer holds.

Previously, we have covered SentinelOne, Inc. (S) in March 2025, wherein we summarized a bullish thesis by Matthew | Sycamore Capital on Substack. The author argued that SentinelOne was an underappreciated AI-driven cybersecurity leader, highlighting 29% YoY revenue growth in Q4 FY25, its first non-GAAP operating profit, and a strong $1.1B cash balance with no debt. The author pointed to expanding enterprise adoption, multi-module usage, and platform diversification as signs of long-term upside despite near-term ARR headwinds. Since our previous coverage, the stock is up 8.1%.

SentinelOne, Inc. (S) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held S at the end of the first quarter which was 47 in the previous quarter. While we acknowledge the potential of S as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.