To The Moon

$Okta Inc.(OKTA)$ $SentinelOne, Inc(S)$

Cybersecurity spending continues to rise as regulatory bodies impose stricter security measures on enterprises. Beyond the fear of losing proprietary and customer data, facing cyberattacks, or suffering financial losses, companies now face additional pressure from regulators, further driving demand for cybersecurity solutions. As a result, investors are increasingly interested in companies within this industry.

In this article, I’ll be analyzing SentinelOne and Okta to determine which of these two cybersecurity stocks presents a better buying opportunity.

To compare these companies, I’ll evaluate them based on revenue growth, operating margin, cash flow from operations, and valuation. I’ll assess their intrinsic value using discounted cash flow (DCF) models and analyze valuation metrics like price-to-earnings (P/E) and price-to-free-cash-flow ratios.

Okta

SentinelOne

Revenue Growth

Both companies have demonstrated strong growth. Okta reported $2.5 billion in trailing 12-month revenue, up from approximately $1.5 billion in 2022. SentinelOne has grown from around $200 million a few years ago to $770 million today. However, due to their relatively recent public listings, historical data is somewhat limited.

Okta Earning Overview

Okta is scheduled to announce its fourth-quarter and fiscal year 2025 financial results on March 3, 2025, after market close.

In the third quarter of fiscal year 2024, Okta reported:

• Adjusted Earnings Per Share (EPS): $0.67, exceeding analyst expectations of $0.58.

• Revenue: $665 million, a 14% year-over-year increase, surpassing the anticipated $650 million.

• Subscription Revenue: $651 million, also a 14% increase from the previous year.

• Non-GAAP Operating Income: $154 million to $156 million, yielding a non-GAAP operating margin of 23%.

• Non-GAAP Free Cash Flow Margin: Approximately 32%.

For the full fiscal year 2025, Okta raised its outlook to:

• Total Revenue: $2.595 billion to $2.597 billion, representing a 15% year-over-year growth.

• Non-GAAP Operating Income: $573 million to $575 million, yielding a non-GAAP operating margin of 22%.

• Non-GAAP Free Cash Flow Margin: Approximately 25%.

These projections reflect Okta's strategic focus on security, growth, and scalability, with investments in partner ecosystems and go-to-market specialization to drive future performance.

Sentinel One Earning Overview

Sentinel is scheduled to release its fourth-quarter and fiscal year 2025 financial results on March 12, 2025, after market close. In the third quarter of fiscal year 2025, SentinelOne reported:

• Total Revenue: $210.6 million, a 28% increase from $164.2 million in the same quarter of the previous year.

• Annualized Recurring Revenue (ARR): $859.7 million, up 29% year-over-year.

• Customers with ARR of $100,000 or more: 1,310, a 24% increase from the previous year.

• Gross Margin: GAAP gross margin of 75%, up from 73% in the prior year; non-GAAP gross margin of 80%, up from 79%.

• Operating Margin: GAAP operating margin of -42%, an improvement from -50% in the same quarter last year; non-GAAP operating margin of -5%, up from -11%.

Following this report, SentinelOne raised its full-year fiscal 2025 revenue guidance to $818 million, with an expected fourth-quarter revenue of $222 million.

Key Comparisons:

Revenue Growth: Okta: 14% YoY growth in total revenueSentinelOne: 28% YoY growth in total revenue, with a stronger growth rate than Okta

Profitability: Okta: Positive operating income and free cash flow margin.SentinelOne: Negative operating margins, but showing improvements.

Subscription/ARR: Okta: $651 million in subscription revenue, 14% YoY growthSentinelOne: $859.7 million in ARR, 29% YoY growth, indicating strong recurring revenue growth

Outlook: Okta: Raised revenue guidance for FY2025 to $2.595–$2.597 billionSentinelOne: Raised revenue guidance for FY2025 to $818 million, with a strong Q4 forecast

Stock Performance (as of February 22, 2025): Okta: $92.75, down 2.44%SentinelOne: $22.12, down 2.88%

Both companies show solid growth in their respective sectors, with SentinelOne demonstrating stronger growth in revenue and ARR but still operating at a loss, while Okta has positive operating income and better free cash flow margins. Both stocks reflect some volatility, with slight declines observed recently.

Operating Margins

There are two key takeaways here:

• Both companies are currently unprofitable, with SentinelOne at -42% and Okta at -5%.

• Both are showing significant improvement. SentinelOne has improved from -120% to -42%, while Okta has progressed from -60% in 2022 to -5.41% today.

I don’t mind investing in companies that are currently unprofitable as long as they demonstrate progress toward profitability and a clear path to achieving it. Both SentinelOne and Okta fit this criterion. With continued growth and economies of scale, they can achieve profitability, either by expanding further or optimizing costs.

Cash Flow from Operations

Both companies are now cash-flow positive and improving. SentinelOne’s operating cash flow margin has improved from -80% in 2021 to +4% today, while Okta’s has grown from -30% in 2017 to +25%. While Okta’s cash flow is stronger, SentinelOne’s improvement trajectory is particularly notable.

Valuation

For SentinelOne, my DCF model estimates an intrinsic value of $62 per share, compared to its current market price of $24, indicating significant undervaluation. SentinelOne has a low beta of 0.65, lower than many cybersecurity stocks. Adjusting the beta to 1.0 still results in an undervaluation, with a revised intrinsic value of $37 per share. Even at a beta of 1.25, the stock remains undervalued at $28.86 per share.

For Okta, my DCF model estimates an intrinsic value of $117 per share, compared to its current price of $96. If we adjust Okta’s beta to match SentinelOne’s 0.65, the intrinsic value drops to $25 per share. However, I find a beta of 1.01 more reasonable for comparison, making Okta about 20% undervalued.

Using forward P/E ratios, SentinelOne trades at 125x forward earnings, while Okta trades at 32.8x forward earnings, nearly 4 time. Both stocks are trading near the lower end of their historical P/E ranges.

Conclusion

Based on these factors, both stocks appear undervalued and present compelling opportunities. Okta has stronger financials, while SentinelOne shows more promising improvement trends. The DCF model suggests SentinelOne is more undervalued, whereas Okta is more attractively priced based on forward P/E.

If I had $10,000 to invest, I’d consider splitting it evenly between both. However, if I had to choose just one, I would go with Okta—but it’s a close call.

@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.