Debate between CrowdStrike and SentinelOne: Predicting the Superior Cybersecurity Stock for 2025
Debate between CrowdStrike and SentinelOne: Predicting the Superior Cybersecurity Stock for 2025
Cybersecurity was a major talking point in 2024, primarily due to negative reasons. Despite numerous high-profile security breaches, the most notable incident was a global outage of CrowdStrike (CRWD, -2.05%). Surprisingly, despite the outage, CrowdStrike managed to bounce back, recording a robust year-on-year growth of approximately 38%. In contrast, its competitor SentinelOne (-1.16%), aiming to capitalize on CrowdStrike's mishap, experienced a decline of about 18% this year.
Let's delve deeper to determine which stock is better equipped to dominate the cybersecurity scene in 2025.
Expansion prospects
CrowdStrike gained a strong foothold in endpoint security through its Falcon platform. However, its most significant opportunity is the emerging trend of consolidating various cybersecurity aspects on a single platform, managed by a single vendor. Leveraging its strength in endpoint security, CrowdStrike is well-positioned to capitalize on this trend.
Some of CrowdStrike's emerging sectors include Identity, Cloud, and Next-Gen SIEM (Security Information and Event Management). The AI, automation, and behavioral analytics-driven Next-Gen SIEM sector has been a significant growth driver for the company, with an impressive annual recurring revenue (ARR) growth of over 150%.
Currently, two-thirds of CrowdStrike's customers utilize five or more of its modules, while 20% subscribe to eight or more. CrowdStrike aims to expand its module offerings using its Falcon Flex solution, which allows customers to deploy resources as needed. As a result, these clients typically utilize nine CrowdStrike modules on average.
In Q3, CrowdStrike reported a 29% increase in revenue and a 31% surge in subscription revenue. Its ARR also rose by 27%, albeit impacted negatively by compensatory customer commitment packages introduced to offset the outage's effects. For Q4, the company expects revenue growth of approximately 23%.
SentinelOne is attempting to capitalize on CrowdStrike's misfortune in the endpoint security sector. Its Singularity Platform employs AI to predict, track, and eliminate threats, functioning seamlessly in both public, private, and hybrid cloud environments. Since the CrowdStrike outage, SentinelOne's ability to automatically revert changes to a pre-attack state has emerged as one of its primary selling points.
Countless organizations affected by the CrowdStrike outage were forced to implement manual fixes, reducing productivity for several days. Reportedly, a heavily impacted CrowdStrike customer was Delta Air Lines, which has chosen to file a lawsuit against the cybersecurity firm.
SentinelOne seeks to gain ground after the outage by luring customers away from CrowdStrike. Significantly, SentinelOne reported progress in these efforts, with the most significant enterprise displacements in company history during the last quarter. This included a major Fortune 500 firm shifting to SentinelOne's platform, and a host of federal and local government agencies joining the fold.
Mirroring CrowdStrike, SentinelOne also focuses on upselling its clients. In this regard, the firm's Purple AI solution, enabling analysts to conduct complex threat hunts using only natural language queries, has seen rapid adoption. Purple AI was SentinelOne's fastest-growing solution in history, with its attachment rate doubling comparing Q3 and Q2. This contributed to SentinelOne increasing its revenue by 28% and its ARR by 29% in the last quarter. The company anticipates 27% revenue growth for its Q4 fiscal year.
Furthermore, SentinelOne secured a substantial opportunity in 2025 via a deal with Lenovo. Lenovo, a major PC vendor, will pre-install SentinelOne's Singularity Platform on all its newly released PCs, with the option to upgrade existing security for its users. Lenovo holds an approximately 25% market share in the PC space, having sold around 59 million PCs in 2023.
Lenovo will also develop a new Managed Detection and Response (MDR) service using AI and EDR (endpoint detection and response) capabilities on the Singularity Platform. Lenovo is set to begin shipping PCs with the Singularity Platform from the second half of 2025.
Evaluation and conclusion
From a valuation perspective, SentinelOne presents a more affordable stock option, trading at a substantially lower forward price-to-sales (P/S) multiple compared to CrowdStrike (7.5x vs 19.4x) based on next year's estimates. The significant valuation disparity between the two companies, despite similar revenue growth rates and SentinelOne forecasting higher revenue growth than CrowdStrike (27% vs 23%) for the next quarter, is intriguing.
Considering SentinelOne's lower valuation, robust growth, and substantial opportunities with Lenovo, the stock should outperform in 2025. As a result, SentinelOne emerges as one of my top picks in the cybersecurity sector for the forthcoming year.
In terms of finance and investing, the lower valuation of SentinelOne, trading at a 7.5x forward price-to-sales (P/S) multiple compared to CrowdStrike's 19.4x, could make it an attractive investment opportunity. Moreover, SentinelOne's projected revenue growth of 27% for its Q4 fiscal year, which is higher than CrowdStrike's projection of 23%, adds to its potential for outperformance in 2025.
Regarding money and expanding business opportunities, SentinelOne has secured a significant deal with Lenovo, which will pre-install SentinelOne's Singularity Platform on all newly released PCs, opening up a potential market share of around 25% in the PC space. This partnership could significantly boost SentinelOne's revenue and customer base, creating potential for strong financial returns.