I don't think the Series S will eat into any of the PS5's market share, tbh. It will need a $200 price advantage in order to outsell the PS5 DE, otherwise the digital PS5 offers much better value proposition.
The PS5 DE will almost certainly outsell the Series S in aggregate. Playstation look to be in an incredibly strong sales position across the board.
I do think though that the Series S caters better for a large part of the market than the Series X does, and that in making the Series S available they're made a more aggressive move for the younger casual audience (or at least to capture their parents) than PS5 DE, too. Bear in mind especially that this audience is less sensitive to "price/performance" valuations than you or I.