The Nasdaq Composite index is up 20% this year, and it's trading near a record high. But some technology stocks are yet to join in on the rally.
SentinelOne (NYSE: S) is down 23% year to date, although it's comfortably off its worst levels. The company develops cybersecurity software powered by artificial intelligence (AI), which is likely to experience significant demand, so I'll argue why its stock deserves to be higher.
Peloton Interactive (NASDAQ: PTON) , on the other hand, has suffered a 36% decline this year. I think the chances of a comeback are shrinking, so it might be one stock to avoid. Investors will struggle to extract the best returns from the bull market by holding on to stocks facing real structural challenges.
The stock to buy: SentinelOne
Analysis by McKinsey & Company suggests companies are on track to spend a collective $213 billion on cybersecurity this year. But that's $1.8 trillion short of what they should be spending, according to the firm. Considering cybercrime could cause $9.5 trillion in damages this year (according to Cybersecurity Ventures), the corporate sector definitely needs to spend more on protection.
SentinelOne places artificial intelligence (AI) at the core of its cybersecurity products because it believes machines can react much faster than humans. Its Singularity platform is a holistic solution covering endpoint protection, identity security, cloud security, and more. It comes with a host of unique features, including some not offered by industry leaders like CrowdStrike .
One-click rollback is a good example. In the event of a successful attack, managers can revert networks back to their original pre-breach state with a single click, saving countless hours that might otherwise be spent manually piecing things together.
Plus, CrowdStrike is cloud-based, whereas SentinelOne can be installed locally across devices. That means it's always on, even without an internet connection.
SentinelOne generated $186 million in revenue during the fiscal 2025 first quarter (ended April 30), a 40% increase from the year-ago period. CrowdStrike grew its revenue by only 33% in its recent quarter, and although it brought in far more money ($921 million), it still suggests SentinelOne is taking some market share.
SentinelOne stock is down 23% this year, but it's down 75% from its all-time high, which was set during the tech frenzy in 2021. It was trading at a price-to-sales (P/S) ratio of over 100 back then, which was ludicrously expensive, so the decline in stock price has brought it back to earth. In fact, SentinelOne stock now trades at around one-third the P/S of CrowdStrike:
PS ratio data by YCharts
Based on SentinelOne's strong revenue growth, its valuation, and the size of the cybersecurity opportunity, now might be a great time for investors to pounce on the stock.
The stock to sell: Peloton Interactive
Peloton was a publicly traded company for only six months before the pandemic struck in March 2020. By the end of that year, its stock had hit an all-time high of $162, which was a 458% gain from $29 at its initial public offering. Unfortunately for investors, that marked the peak, and the stock has steadily declined to just $3.90 as of this writing.
Demand for Peloton's at-home exercise equipment surged when lockdowns and social restrictions came into effect, but life gradually returned to normal toward the end of 2021. As a result, Peloton's revenue peaked at $4 billion in fiscal 2021 (ended June 30, 2021), and it has declined every year since.
Management's guidance suggests revenue will come in at only $2.7 billion for fiscal 2024, which just ended (the official results will be reported in August).
Peloton hired CEO Barry McCarthy in February 2022. He previously worked in executive roles at Spotify Technology and Netflix . McCarthy made positive changes, including shrinking Peloton's workforce by half, offshoring the manufacturing of its exercise equipment, and tapping third-party retailers like Amazon to reach more customers.
Unfortunately, McCarthy decided to step down earlier this year. He left Peloton in a much better position despite failing to reignite its revenue growth. The company's net loss shrank to $521 million in the first nine months of fiscal 2024 (ended March 31), from over $1 billion in the year-ago period. Plus, the company managed to deliver positive free cash flow of $8.6 million in the recent third quarter.
Those improvements placed Peloton in a position to complete a $1.35 billion debt refinancing in May. The company used $1 billion to refinance existing loans, which pushed the due date to 2029, and it raised a fresh $350 million from investors for working capital, which is also due to be repaid in 2029. That buys management five more years to continue making progress.
However, it's going to be extremely difficult to achieve sustained profitability -- especially on the basis of generally accepted accounting principles ( GAAP ) -- without revenue growth because the only other way to get there is by slashing costs even further. Cutting growth initiatives like marketing as well as research and development (which are two of Peloton's largest operating costs), will only add further pressure on the company's revenue, leading to an accelerated downward spiral.
That is likely why Peloton stock hasn't staged a convincing bounce since the debt restructuring. Investors should probably sit on the sidelines for a few more quarters while management puts together a concrete plan detailing the path forward. Absent that, it might be best to avoid the stock entirely.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, CrowdStrike, Netflix, Peloton Interactive, and Spotify Technology. The Motley Fool has a disclosure policy .
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