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- Stocks to Benefit from a Tech Rally: Palo Alto
Stocks to Benefit from a Tech Rally: Palo Alto
This is a California-based company, which sells firewall appliances, domain name system (DNS) security software; and other protection management solutions to cover threat prevention, malware and persistent threat, URL filtering, laptop and mobile device protection etc. Government entities operating in education and energy, financial services and healthcare, Internet and telecommunications are also among its clients' base.
The company already released its solid Q3 numbers about a week ago, on November 15. Its EPS (equity per share) of $1.38 much exceeded consensus expectations of $1.16, even though it was little less than $1.44 in the previous quarter. A similar situation was for revenue of $1.9 billion compared to consensus estimates of $1.84 billion, yet lower than $2.0 billion in Q2.
This news pushed its stock prices down by 8.5% to $242.30 from its November high at $264.75. Some analysts, including the Bank of America's (BofA), downgraded Palo Alto Networks shares from Buy to Neutral. The BofA lowered its target price by $25 to $265 per share, citing a risk of additional pressure on billings and further shortening of debt burden duration. A solid increase in vendor financing activities was partially based on provision of financing in exchange for long-term commitments and larger deal sizes, they said, while watching a 36% QoQ decline in billings.
A progress of many IT companies follows a similar scenario, which does not prevent the explosive growth of their market values in 2023. Shares of Palo Alto Networks gained nearly 89% YTD and already closed a November 15-16 gap with a full comeback to the stock's former positioning. These developments may point to a further rally in Palo Alto Networks, as its shares could join many other favourites of the optimistic tech segment before the year end. Short covering may boost the stock higher in the short-term, at least.
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