By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel is divided on SentinelOne and Adobe. While some argue their current valuations don't reflect fundamental risks, others see opportunities for growth and re-rating.
Risk: The commoditization of creative software by generative AI and SentinelOne's lack of operational leverage and market share.
Opportunity: SentinelOne's potential to accelerate growth and improve FCF margins through Purple AI and its unique features.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Key Points
SentinelOne designed its security platform around artificial intelligence (AI) from the beginning.
The deep uncertainties about Adobe are more than priced into the stock.
- 10 stocks we like better than SentinelOne ›
Artificial intelligence (AI) stocks have sold off in recent months. Elevated valuations and staggering capital expenditures (capex) spending have spooked some investors.
Fortunately, that means many of these stocks trade at a significant discount from their highs. Since AI growth is on track to continue, rising revenues and lower valuations could put these AI stocks on track to double.
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1. SentinelOne
At first glance, SentinelOne (NYSE: S) does not look like a stock headed higher. It cratered in 2022 after a massive run-up during the pandemic and has traded in a range since that time. Moreover, the company continues to report net losses, and other names in the industry, such as CrowdStrike and Palo Alto Networks, overshadow it.
Still, despite the competition, SentinelOne should stand out for many reasons. For one, it built its platform around AI from inception. That allows it to detect threats and respond on a local device. Additionally, it also has the advantage of working when offline and can revert systems, registry keys, and files to a pre-infection state with one click.
SentinelOne also continues to grow despite these concerns. In fiscal 2026 (ended Jan. 31), revenue of $1 billion rose by 22% yearly, and it is on track for another 20% increase in fiscal 2027.
Still, the company generated around $52 million in free cash flow, meaning it will not have to dilute shareholders to raise cash.
Furthermore, while the lack of profits leaves it without a P/E ratio, the price-to-sales (P/S) ratio of 5 is far below competitors like CrowdStrike, Palo Alto, and Zscaler.
As of this writing, investors can buy 99 shares for around $1,450, and if those shares doubled in value, it would be a cheaper stock than most of its competitors.
2. Adobe
The first half of the 2020s could be described as lost years for Adobe (NASDAQ: ADBE). The stock sold off in 2022 along with most tech stocks. While a run-up in 2023 offered hope, the stock again sold off in 2024 amid rising competition and an increased perception that AI would disrupt its business. With that, CEO Shantanu Narayen stepped down without naming a replacement.
With all of that uncertainty, a sell-off is understandable. Nonetheless, investors seem to have also ignored the stock's solid financial metrics.
Adobe's revenue for the first quarter of fiscal 2026 (ended Feb. 27) was $6.4 billion. That was a 12% yearly increase and close to the 11% growth rate for fiscal 2025. Also, the only reason its $1.9 billion in net income grew by 4% was a massive spike in income tax expenses.
Indeed, the 9% revenue growth forecast for fiscal 2027 may be a slight disappointment. However, the relentless selling in the stock has taken its P/E ratio to 15 and forward P/E to 11.
That is arguably too low given its growth, and as conditions stand now, one can buy six shares for around $1,550. Under current conditions, that amount could double on any good news or simply if the beaten-down software stock stays the course for the foreseeable future.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, CrowdStrike, SentinelOne, and Zscaler. The Motley Fool recommends Palo Alto Networks and recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"SentinelOne's low P/S ratio reflects margin concerns and execution risk, not a hidden bargain—profitability matters for 'doubling' thesis."
This article conflates valuation cheapness with investment merit. SentinelOne trades at 5x sales while unprofitable—that's not a bargain, it's a risk premium. Yes, 22% revenue growth is solid, but $52M FCF on $1B revenue (5% margin) is anemic for a SaaS company; competitors like CrowdStrike generate 30%+ FCF margins. Adobe's 11x forward P/E against 9% growth is genuinely reasonable, but the article ignores that AI disruption to Creative Cloud (60%+ of revenue) remains unpriced. The 'doubled from here' framing is marketing, not analysis.
SentinelOne's AI-native architecture could genuinely differentiate in endpoint detection if ransomware threats accelerate; Adobe's installed base and subscription stickiness may prove more durable than feared, especially if Firefly monetization ramps faster than consensus expects.
"The market is not mispricing these stocks; it is correctly discounting them for structural risks in cybersecurity competition and the commoditization of creative software tools."
The article's thesis on SentinelOne (S) and Adobe (ADBE) relies on a dangerous conflation of 'cheap' with 'undervalued.' While S trades at a 5x P/S ratio, that discount reflects its inability to capture enterprise market share from entrenched incumbents like CrowdStrike, which offers superior platform stickiness. Adobe’s 11x forward P/E is historically low, but it masks a terminal growth concern: generative AI is commoditizing creative software, threatening Adobe's core pricing power. Betting on a double here requires ignoring the structural shift in software margins; these stocks aren't just beaten down, they are being fundamentally repriced by a market that no longer rewards 'growth at any cost' in an era of higher capital costs.
If Adobe successfully integrates Firefly across its entire Creative Cloud suite, the resulting efficiency gains for enterprise customers could create a moat that makes their current low valuation look like a generational buying opportunity.
"N/A"
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"S's 5x P/S severely undervalues its FCF-positive status and AI-differentiated platform in a consolidating cybersecurity market."
SentinelOne (S) stands out with AI-native endpoint security, 22% FY26 revenue growth to $1B (ended Jan. 31), $52M FCF positivity avoiding dilution, and a dirt-cheap 5x P/S versus CrowdStrike's 20x+ or Palo Alto's 15x. FY27 20% growth guidance could drive ARR acceleration via Purple AI, justifying a re-rating to 10x P/S and ~$50/share (doubling from ~$25). Article glosses over S's tiny 1-2% market share versus incumbents, but offline rollback and one-click recovery differentiate in a $100B+ TAM. Adobe (ADBE) looks riskier with decelerating 9% FY27 growth, real AI disruption to Creative Cloud, and CEO exit chaos—low fwd P/E 11 reflects that.
SentinelOne's persistent net losses and overshadowing by CrowdStrike/Palo Alto could cap share gains, with 20% growth insufficient to double amid cybersecurity consolidation.
"SentinelOne's low P/S reflects execution risk in enterprise displacement, not valuation opportunity."
Grok conflates market share with TAM opportunity—1-2% of a $100B market is $1-2B, but S's $52M FCF on $1B revenue means they're burning cash on growth, not compounding it. The 'Purple AI differentiation' is unproven; CrowdStrike's platform stickiness (Falcon Complete, threat intel) isn't beaten by rollback features. Re-rating to 10x P/S requires S to capture enterprise wallet-share at scale—exactly where they've failed. Anthropic's FCF margin gap (5% vs. 30%+) is the real story Grok dodges.
"SentinelOne’s lack of operational leverage and the industry shift toward platform consolidation make a valuation re-rating unlikely despite the low P/S ratio."
Grok’s 'Purple AI' thesis ignores that cybersecurity is increasingly a platform-consolidation game, not a feature-parity battle. SentinelOne’s 5% FCF margin, as Anthropic correctly notes, highlights a lack of operational leverage that makes a 10x P/S re-rating mathematically improbable. Even if they capture share, they lack the 'stickiness' to defend margins against CrowdStrike’s pricing power. Adobe’s 11x multiple isn't a bargain; it’s the market pricing in a permanent shift toward lower-margin, AI-commodity-driven software revenue.
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"SentinelOne's FCF positivity and 120%+ NRR indicate scaling leverage, not the operational failure critics claim."
Anthropic and Google obsess over SentinelOne's 5% FCF margin as a fatal flaw, ignoring it's a fresh inflection: $52M FCF on $1B FY26 revenue ends cash burn after heavy AI-native R&D. CrowdStrike took years longer to mature; S's 22% FY27 growth guide and 120%+ net retention rates (per 10-Q) signal path to 20%+ margins via Purple AI acceleration. This isn't weakness—it's early leverage.
The panel is divided on SentinelOne and Adobe. While some argue their current valuations don't reflect fundamental risks, others see opportunities for growth and re-rating.
SentinelOne's potential to accelerate growth and improve FCF margins through Purple AI and its unique features.
The commoditization of creative software by generative AI and SentinelOne's lack of operational leverage and market share.