Third Point leader Daniel Loeb (Trades, Portfolio) disclosed last week he reduced his stake in SentinelOne Inc. (S, Financial) by 5.12%.
Using an event-driven, value-oriented approach to stock picking, the guru's New York-based hedge fund is known for taking activist positions in underperforming companies with a catalyst that will help unlock value for shareholders.
After trimming the investment by 19.88% in the second quarter, GuruFocus Real-Time Picks, a Premium feature based on 13D, 13G and Form 4 filings, show Loeb sold 1.07 million shares of the Mountain View, California-based cybersecurity company on July 12, impacting the equity portfolio by -0.61%. The stock traded for an average price of $23.81 per share on the day of the transaction.
He now holds a total of 20 million shares, which occupy 11.34% of the equity portfolio and remains his third-largest holding based on 13F portfolio data. GuruFocus estimates Loeb has lost 40.37% on the investment since establishing it in the second quarter of 2021.
Founded in 2013, the company, which offers artificial intelligence-powered solutions to prevent, detect and fight cyberattacks on a single autonomous XDR platform, has a $7 billion market cap; its shares were trading around $24.98 on Tuesday with a price-book ratio of 4.02 and a price-sales ratio of 22.34.
Since its initial public offering in June of 2021, the stock has tumbled around 40%.
On Aug. 31, SentinelOne reported its second-quarter 2023 financial results. The company posted an adjusted earnings loss of 20 cents per share on $102.5 million in revenue, which grew 124.1% from the prior-year quarter.
Further, annualized recurring revenue increased 122% to $438.6 million.
The company also recorded $1.2 billion in cash, cash equivalents and short-term investments.
In a statement, CEO Tomer Weingarten commented on SentinelOne’s performance.
“We delivered hyper growth and outperformance across all aspects of our business in Q2 - ARR, revenue, customer growth, net retention and margins,” he said. “I'm proud of our team's execution despite an evolving macro environment. Through Singularity XDR, we're delivering what enterprises need the most: best-in-class protection and superior platform value.”
Since “business momentum remains extremely strong,” Chief Financial Officer Dave Bernhardt noted the company also raised its full-year growth expectations.
For the third quarter, SentinelOne now projects revenue of $111 million along with a non-GAAP gross margin of 71%.
It also anticipates revenue between $415 million and $417 million for the full year, while the non-GAAP gross margin should fall in the 70.5% to 71% range.
GuruFocus rated SentinelOne’s financial strength 8 out of 10, driven by a robust Altman Z-Score of 7.82 that indicates it is in good standing.
In addition to being weighed down by negative margins, the company’s returns on equity, assets and capital are underperforming versus a majority of competitors.
Despite the reduction, Loeb remains SentinelOne’s largest guru shareholder with a 7.12% stake. Chase Coleman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Steven Cohen (Trades, Portfolio) also have positions in the stock.
Portfolio composition and performance
The guru's $4.22 billion equity portfolio, which was composed of 58 stocks as of the end of the second quarter, is most heavily invested in the health care, energy and utilities sectors.
Other software stocks he held as of June 30 were Global Blue Group Holding AG (GB, Financial) (GB.WS, Financial) and Aurora Innovation Inc. (AUR, Financial)(AUROW, Financial).
Third Point posted a return of 22.9% for 2021, underperforming the S&P 500’s 28.7% return.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
