PreMarket Prep Stock Of The Day: Palo Alto Networks

With the chaos in Thursday’s markets instigated by Russia’s invasion of Ukraine, investors are still hunting for bargains in the technology sector. Back in the 1990s, the darling of the tech sector was storage and networking issues.

In the 2020s, it may be cybersecurity issues moving into the role.

With that in mind, pure play cybersecurity vendor Palo Alto Networks Inc PANW is the PreMarket Prep Stock of the Day.

Palo Alto Price Action In 2022: After making a new all-time high in December ($572.67), the issue backed off to post its highest monthly closing price to end the year at $556.76.

While the growth technology issues with high price/earnings ratios are being hammered this year, the issue has retreated, but the decline pales in comparison to similar issues.

In fact, the issue bottomed on the same day as the S&P 500 index, Jan. 24, at $455.76. The lowest it has been since making that level was earlier in Thursday’s session, when it bottomed off the open at $466.50.

It should be noted that low was just under its low from Tuesday ($466.57), which was the day of its second-quarter report.

Palo Alto's Q2 Report, Price Action: After the close on Tuesday, the company reported quarterly earnings of $1.74 per share, which beat the analyst consensus estimate of $1.64 by 6.1%.

The company reported quarterly sales of $1.32 billion, which beat the analyst consensus estimate of $1.28 billion by 2.88%. In addition, the company provided slightly higher third-quarter and FY2022 EPS and sales guidance.

In this tough earnings environment, while companies that have missed have been punished, most of the companies that have beat have not been able to hold early gains off the print.

As a result, the issue was higher by $35 early in the session but only ended up with a meager gain of $2.10 ($475.51 to $477.61) in Wednesday’s session.

Buy The Dip? As indexes, as well as individual issues, opened much lower Thursday, several have bounced off their early morning lows and Palo Alto Networks is one of them. After a lower opening ($467.06 vs. $477.61), it immediately bottomed at $466.50 and roared off the potential long-term double bottom. 

It has far surpassed Wednesday’s high ($511.36) and is trading 12.37% higher at $536.68 Thursday afternoon. 
Moving Forward: While the issue still trades a very high price/earnings ratio, it may eventually grow into the valuation as there may be increased spending in the cybersecurity sector. Especially, if geopolitical tensions continue to rise. Although it seems that investors may have missed a long-term bottom this morning, there certainly may be retreats to purchase the issue on weakness instead of chasing on strength.