Palo Alto Networks is the IBD Stock of the Day as the cybersecurity stock finds support at a key moving average. With acquisitions, Palo Alto has built a cloud computing platform to deliver products and services, boosting PANW stock.
On the stock market today, Palo Alto stock edged down 0.2% to 242.91.
Palo Alto stock has surged 74% in 2023. The cybersecurity stock is extended from a prior base and working on a fresh consolidation.
PANW stock joined the S&P 500 on June 20, boosting shares. The stock, however, pulled back after touching a profit-taking zone out of an earlier consolidation, which lasted more than a year.
Now, though, Palo Alto stock has found support at its 21-day exponential moving average. IBD research has found that with the biggest stock market winners, they tend to find support at the 21-day line after a breakout for at least several weeks.
PANW Stock: Roots In Firewall Security
With roots in the "firewall" network security market, Palo Alto has built a broad cloud-based security platform. Firewall appliances protect computer networks by blocking online intrusions and monitoring web-based apps.
Also, Palo Alto has been cutting prices, pressuring rivals such as Zscaler.
"Some of our conversations with Palo Alto Networks customers also indicate more generous discounts in (the July quarter)," Goldman Sachs analyst Gabriela Borges said in a Tuesday note to clients.
Borges added: "We believe Palo Alto Networks has the most complete platform today based on its acquisitions over the last three years."
Acquisitions have been a big part of Palo Alto's strategy. The cybersecurity firm has spent roughly $3.46 billion on acquisitions since 2018.
Cybersecurity Group Ranking
Palo Alto's growth is coming from customers that access cybersecurity products and services remotely via the internet. Also, a shift toward higher-margin, subscription-based recurring revenue has buoyed Palo Alto stock.
The IBD Computer-Software Security group ranks No. 45 out of 197 industry groups IBD tracks. Growing competition with Microsoft has pressured the group.
That's one reason Palo Alto stock has been in a downtrend from the past few weeks. If PANW stock makes a strong move — or clears today's high — it would break the short downtrend, providing another reason for an early entry.
In addition, Palo Alto has been improving cybersecurity products with artificial intelligence tools, along with rival CrowdStrike Holdings. Palo Alto and CrowdStrike are among AI stocks to watch.
Further, PANW stock belongs to the IBD Leaderboard.
Palo Alto Stock: Expanding From Firewall Market
Palo Alto's fiscal third-quarter earnings for the period ended April 30 rose 83% to $1.10 on an adjusted basis. Further, revenue for PANW stock rose 24% to $1.72 billion, including acquisitions.
Billings, a sales growth metric, rose 26% to $2.3 billion, edging by estimates.
For the current quarter ending in July, Palo Alto predicted earnings of $1.28 per share on revenue of $1.95 billion at the midpoint of its outlook. Meanwhile, analysts had estimated profit of $1.20 a share on revenue of $1.95 billion.
In the network firewall market, Palo Alto competes with Fortinet, Cisco Systems, Check Point Software Technologies and others.
Through acquisitions, Palo Alto Networks has expanded into endpoint security and vulnerability management. Endpoint tools detect malware on laptops, mobile phones and other devices that access corporate networks.
PANW Stock Technical Ratings
In addition, Palo Alto has pushed into a market called Secure Access Service Edge, or SASE. The security tools support distributed workers and branch offices.
Meanwhile, the cybersecurity stock holds an IBD Composite Rating of 99 out of a best possible 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.
PANW stock has an Accumulation/Distribution Rating of A-minus. 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.
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