Why SentinelOne Stock Is Sinking Today

SentinelOne (NYSE: S) stock is losing ground in Thursday's trading. The cybersecurity company's share price was down 9.2% as of noon ET. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) was flat, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was up 0.1%.

After the market closed yesterday, SentinelOne published its third-quarter earnings results. While the company posted sales that beat Wall Street's target, it also posted a wider-than-anticipated loss -- and management's forward guidance appears to have underwhelmed investors.

SentinelOne slips on mixed Q3 report

SentinelOne posted a loss of $0.25 per share on sales of $210.6 million in the third quarter. For comparison, the average analyst estimate had called for a loss of $0.20 per share on sales of roughly $209.7 million. Revenue was up approximately 28% year over year in the quarter, and the business closed out the period with its first positive free cash flow across a trailing-12-month (TTM) stretch.

What's next for SentinelOne?

In conjunction with its Q3 report, SentinelOne raised its full-year guidance. The company now expects sales of roughly $818 million for the period -- up from its previous guidance for sales of $815 million. It also issued guidance for sales of $222 million in the fourth quarter -- topping the average analyst estimate's call for revenue of $220 million. But while the company increased its revenue target for the full-year period and beat the average Wall Street target for Q4 revenue, it appears that some investors were looking for stronger performance.

SentinelOne's wider-than-expected loss in Q3 raises questions about cost structures and resource utilization as the company scales. In the wake of a massive IT outage triggered by an update rolled out by cybersecurity rival CrowdStrike, some investors and analysts have been hoping that SentinelOne would easily soak up some of its competitor's business. But the company's Q3 performance and forward guidance suggests that the company hasn't been able to cut back as much on marketing initiatives, and revenue expansion has not been as strong as some had hoped.

SentinelOne may still be able to solidify itself as a long-term winner in the cybersecurity space, but the short-term trade on the heels of CrowdStrike's missteps appears to be weakening.

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Keith Noonan has positions in CrowdStrike. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy.