Palo Alto Networks
Palo Alto Networks
PANW
7.65%
235%
- Shares broke out of bullish double-bottom pattern with buy point of 260.25
- Relative Strength Rating stands at 51 out of a possible 99, a weak indicator
- Stock underperformed after its founding in 2005, boomed in 2014 and 2015
Industry Group Ranking
Emerging Pattern
Double Bottom
One of the three positive chart patterns to look for when doing technical analysis of a stock. This pattern looks like the letter W, but in almost all cases, the second leg down should undercut the low price of the first.
Palo Alto Networks (PANW) is the IBD Stock of the Day as the cybersecurity firm on Monday reported fiscal first-quarter earnings and revenue that topped estimates amid an acquisition spree. PANW stock climbed into a buy zone as the cybersecurity firm raised January-quarter and full-year guidance.
XThe cybersecurity stock headed into the earnings report with an entry point of 260.25. A 5% buy zone extends to 273.26. Shares jumped 7.7% to close at 278.50 on the stock market today.
Palo Alto stock owns an IBD Relative Strength Rating of only 51 out of a possible 99. However, PANW stock has formed a bullish double-bottom chart pattern. The double bottom looks sort of like the letter "W." It often sets the stage for a rally.
Founded in 2005, Palo Alto launched its initial public offering in 2012. The cybersecurity stock initially underperformed.
New CEO Makes Acquisitions
But Palo Alto stock boomed in 2014 and 2015 as it took share in the computer network "firewall" market vs. Check Point Software Technologies (CHKP), Cisco Systems (CSCO) and others.
Firewall appliances protect computer networks by blocking online intrusions and monitoring web-based apps. However, as corporate America shifts to off-premises cloud-computing services, sales growth has slowed for network firewall appliance makers.
In June 2018, Palo Alto brought in a new chief executive to make strategic changes. The new CEO, Nikesh Arora, was a former top executive at Alphabet's (GOOGL) Google and SoftBank Group. Arora embarked on an acquisition spree to build a broad, cloud-based platform branded "Prisma."
On Nov. 11, Palo Alto made its biggest purchase under Arora. It bought Expanse, a specialist in computer security vulnerability management, in a deal valued at $800 million.
Palo Alto Earnings Beat Expectations
Palo Alto purchased startup CloudGenix for $420 million in cash earlier this year. It also bought the Crypsis Group, an incident response, risk management and digital forensics consulting firm, for $265 million in cash. In all, Palo Alto has spent over $2.4 billion on acquisitions since Arora took the helm.
While much of the old Palo Alto management team has departed, Arora brought in another Google veteran, Amit Singh, as president. Singh founded Google's cloud-computing business.
Palo Alto, meanwhile, has shifted much of its cloud platform to Google infrastructure. The close ties have led to speculation that Google could acquire Palo Alto.
Palo Alto earnings for the October quarter came in at $1.62 a share, up 54% from the year-earlier period. Revenue rose 23% to $946 million, the company said. Billings increased 21% to $1.1 billion vs. estimates of $1.04 billion.
Analysts expected Palo Alto earnings of $1.33 a share on sales of $921.6 million for the period ended Oct. 30. A year earlier, Palo Alto earnings were $1.05 a share on sales of $771.9 million.
Palo Alto Guidance Above Views
For the current quarter ending in January, Palo Alto expects earnings of $1.43, with revenue in a range of $975 million to $990 million. Analysts had estimated earnings of $1.35 a share on revenue of $971 million.
For fiscal 2021, Palo Alto raised its earnings outlook to a range of $5.70 to $5.80 a share vs. estimates of $5.60 a share. Palo Alto said it expects revenue in a range of $4.09 billion to $4.14 billion vs. estimates of $4.02 billion.
Also, the cybersecurity firm forecast full-year billings, a sales growth metric, in a range of $5.08 billion to $5.13 billion vs. estimates of $4.95 billion.
PANW stock has an Accumulation/Distribution Rating of B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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