Analysts' Love for Cybersecurity Stocks Pre-Quarterly
Evercore ISI's Take on Palo Alto Networks
Evercore ISI this week took a bullish stance on Palo Alto Networks by raising its price target from $395 to $455. This move implies a substantial upside of nearly 18% from Monday's closing price. The analysts noted that recent channel commentary was not only more positive but also emphasized solid execution across the board. They maintained their buy-equivalent rating on the shares, indicating their confidence in the company's future performance. Palo Alto Networks had a challenging start to 2024 with management cutting full-year guidance due to a pivot towards a platformization strategy. However, CEO Nikesh Arora believes this move will lead to long-term revenue growth as the industry consolidates. Despite the stock's decline following the guidance cut, it has since recovered and even outperformed the broader market year to date, up 31% compared to the S&P 500's 23% advance. The upcoming quarterly results will be crucial in determining the success of this strategy.The shift to platformization at Palo Alto Networks involves bundling its products and services together, aiming to capture more market share. Larger platformization deals are expected to lead to bigger long-term commitments, as evidenced by conversations with customers and partners. However, there is a concern that if investors see a deceleration in billing despite management's focus on remaining performance obligation (RPO), there could be a sell-off. The market will be closely watching these metrics during the earnings call.
Jefferies' Stance on Palo Alto Networks
On Tuesday, Jefferies also showed confidence in Palo Alto Networks by raising its price target to $450 per share from $400. Analysts expect healthy results from the company, which adds to the positive sentiment surrounding the stock. The market will be eager to see how these higher price targets translate into actual performance and whether they are justified based on the company's fundamentals.Palo Alto Networks will post its quarterly results on Wednesday after the market closes. The outcome of these results will provide valuable insights into the effectiveness of the platformization strategy and the company's overall financial health. Investors will be looking for signs of growth and stability in order to make informed investment decisions.
Morgan Stanley's Outlook for CrowdStrike
Morgan Stanley on Monday forecasted more upside for CrowdStrike, which is set to report its results after the bell on November 26. The analysts raised their price target on the cybersecurity stock to $355 per share from $325, representing a 4% increase from Monday's closing price. They believe that despite the global IT outage caused by CrowdStrike in July, net bookings for the company will be better than feared, leading to improved net new average recurring revenue estimates.The incident had a significant impact on CrowdStrike's stock, causing it to plummet nearly 11% in the session following the news. However, the stock has since recovered and is now back to pre-outage levels. Analysts are still concerned about the long-term impact of the outage on the business and will be closely monitoring the upcoming earnings report for any signs of churn or customer losses. Jim Cramer has touted CrowdStrike's "remarkable comeback" since July, and investors will be looking for further evidence of its resilience in the face of geopolitical uncertainties.
The Market's Reaction and Outlook
Geopolitical tensions, such as the Ukraine-Russia war, have contributed to a broader market decline, causing Palo Alto Networks' shares to be down slightly on Tuesday. However, the demand for cybersecurity services remains strong as the risks of hacks and virtual breaches continue to increase. This creates a favorable environment for cybersecurity stocks like Palo Alto Networks and CrowdStrike.As subscribers to the CNBC Investing Club with Jim Cramer, investors will receive a trade alert before Jim makes a trade. This allows them to stay informed and make timely investment decisions. The performance of these cybersecurity stocks in the coming quarters will be closely watched as they navigate the challenges and opportunities of a consolidating industry. With the right strategies and execution, these companies have the potential to deliver strong returns for investors.