Will Palo Alto's Q2 Earnings Validate 'Cybersecurity Is Bigger Than AI'?

Palo Alto Networks Inc. PANW has been playing catch-up in the cybersecurity space, trailing competitors like CrowdStrike Holdings Inc CRWD and Fortinet Inc FTNT over the past year.

PANW stock is up 7.45%, as compared to CRWD which has returned 32.36% to investors over the past year. FTNT leads the pack with a 58% return over the past year.

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Palo Alto Q2 Earnings Buzz: Will PANW Deliver?

However, with second-quarter earnings set for release after Thursday's market close, investors are eyeing a potential catalyst for the stock. Wall Street expects EPS of 78 cents on revenue of $2.24 billion, but the real focus will be on forward guidance.

Hightower Advisors' Chief Investment Strategist Stephanie Link sees cybersecurity as a bigger secular growth story than AI. “I believe cybersecurity is bigger than AI,” she in an email, “that we will see more M&A… and that the big five will continue to get bigger.”

She notes that CTOs remain committed to AI and cybersecurity spending, positioning PANW stock for long-term double-digit growth.

Read Also: Congressional Trading Report: Rep. Marjorie Taylor Greene Bought Over $3K In Palo Alto Networks Stock

Technical Tailwinds Strengthen PANW Stock’s Bullish Case

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Despite its underperformance relative to peers, PANW stock is flashing strong bullish signals. The stock trades above its eight, 20, 50 and 200-day simple moving averages, suggesting sustained buying pressure.

The MACD (moving average convergence/divergence) indicator at 2.63 further reinforces a bullish setup, while an RSI (relative strength index) of 63.35 signals the stock is approaching overbought levels but still has room to run.

Guidance Will Make Or Break PANW Stock Rally

A key focus for investors will be Palo Alto Networks' remaining performance obligation (RPO) bookings, noted Link. Expected to rise 9% to $12.9 billion-$13 billion, this marks a slowdown from last quarter's 17% growth, she said.

However, the market anticipates a return to double-digit expansion in the back half of the year. Palo Alto's AI-powered security offerings, which saw ARR of $250 million in the first quarter, could provide an extra boost to its long-term narrative.

With strong technicals, a bullish industry backdrop, and a make-or-break earnings call on deck, PANW stock could finally be ready to shake off its underperformance and stage a breakout.

Investors will be watching closely to see if the cybersecurity giant can live up to the hype.

Read Next:

• 3 ETFs For Cybersecurity Investors As AI-Driven Threats Grow

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