Palo Alto Networks (NYSE:PANW) is a hot topic so far in 2019.
The cybersecurity company lost momentum toward the end of 2018. Matter of fact, that’s putting it lightly — PANW lost nearly a third of its value between September 13 and November 11.
This drop was due to a few factors. But mostly because tech stocks, in general, had a rough go in this quarter. Couple that with a valuation that many traders deemed too high, and you can see why PANW’s stock suffered.
Since then, the company’s managed an impressive recovery and continuing to gain momentum. But that’s not the only reason this stock is notable.
Palo Alto made headlines in recent years for making a number of acquisitions, such as of LightCyber and RedLock. Thanks to moves like these and impressive financial growth in 2019, a lot of traders see potential here. Some expect PANW’s stock price to continue to trend up.
So let’s break it down: We have a company that’s making a recovery, gaining momentum, and there’s news around it. Can that be enough to put PANW on your trade radar?
Let’s look closer … recent news and announcements can tell us more about what we might expect from Palo Alto in 2019.
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Table of Contents
Why Cybersecurity Stock Is in Demand
Before digging into the hype, we should start by finding out why cybersecurity is a hot industry right now.
The reason is pretty simple: the world is continuously becoming more digitized. Everything from smartphones to smart refrigerators is connected to the Internet of Things (IoT).
Individuals and businesses rely on digital, internet-connected products to store and control important information. And that means our most private information is always at risk of being uncovered by hackers.
In the coming years, our lives will continue to become more digital. Individuals and businesses alike will rely on cybersecurity services to protect their sensitive information.
What’s Going on With PANW?
So why is PANW trending lately?
Palo Alto Networks popped up on many traders’ watchlists recently. That’s mostly thanks to positive price activity and an impressive Q2 earnings report.
Recent Activity
Since the start of the year, the PANW stock price is growing fairly steadily.
PANW ended 2018 with a stock price of $188.35. Since then, the price continued to climb before peaking at a price of $254.88 on February 27. Guess when that happened? That’s right, one day after the company released its Q2 earnings report.
Now, after reaching $260.03 intraday on gap up, the price dipped slightly shortly after this. In fact, it had five red days in a row after peaking. That’s what I call a “Gap and Crap.”
As traders expect good news, in this case, a solid earnings report, the stock starts to gain momentum before dipping after the news is actually announced. You don’t typically want to be around when the news is announced. Instead, buy the rumor, sell the news.
But since its slight dip at the end of February, PANW is gaining momentum again.
PANW Current Stock Price
At the time of this writing, PANW’s stock price is $237.07. That’s a slight drop from this year’s high, but a significant $48.72 year-to-date (YTD) increase.
Could PANW be a runner? High-priced stocks don’t tend to run like penny stocks — so not likely.
Financial Growth
What’s the reason for this year’s positive price trend?
PANW aims to be the leading provider of cybersecurity solutions. Ambitious goal, right?
Well, the company’s latest earnings report seems to be convincing a number of traders that the company’s on its way to achieving its goal.
You can check out PANW’s second quarter 2019 financial report here … but here are the main bullet points:
- Q2 revenue grows 30% to $711.2 million.
- Q2 billings grow 27% to $825.5 million.
- Deferred revenue grows 32% to $2.5 billion.
- PANW announces $1 billion share repurchase authorization.
These numbers show that, despite heavy competition in the cybersecurity industry, PANW can continue to make itself a more profitable company.
Endpoint Security Product Reaches New Milestone
A more recent milestone that may positively impact PANW’s price activity is news relating to one of its newest products.
One of Palo Alto’s products is Traps. From the company’s website: “Traps endpoint protection and response stops threats on endpoints and coordinates enforcement with network and cloud security to prevent successful cyberattacks.”
On March 22, the Federal Risk and Authorization Management Program (FedRAMP) gave Traps an “In Process” designation.
That’s not nothin’ — it’s actually a milestone. It indicates that the U.S. public sector has confidence in PANW’s ability to provide secure and capable security products. The “In Process” milestone means that PANW is on pace for Traps to be FedRAMP-certified.
This could be a major catalyst as federal agencies rely on the FedRAMP certification program to protect the confidentiality of their private data.
So it’s starting to add up: PANW’s YTD performance, its earnings report, and new product developments. I won’t be surprised if the stock continues its positive price trend in the coming months.
Trading Challenge
If you’re surprised by this cybersecurity stock’s rapid rise in popularity, now you hopefully better understand the reason behind it …
It wasn’t just one factor — impressive earnings reports, constant price growth, and product milestones all increased confidence in the company and the stock.
I know what you’re probably thinking. How can anyone possibly keep up with recent trends? There’s a ton of news to sort through every day. And analyzing trending stocks can eat up a serious amount of time.
I’m a self-taught trader, and now I’m a teacher. I’ve been trading for decades, and I don’t believe you need to learn the hard way. Instead, I think you can get past the learning curve, as long as you’re willing to do the work!
Ready to jump in and give trading your best shot? Join my Trading Challenge. It’s designed to guide and train traders of any experience level. My goal is to help you think for yourself as you face the markets.
If you want to trade like a pro, you have to think and act like a pro. Learn to think on your feet. Do your research even when you’re not actively trading. Develop a strategy that works for you — practice it, track it, improve it! Learn to manage your risk.
And never, never, never stop learning.
Think you have what it takes? Apply for the Trading Challenge today. If you want skills, you have to build them. But those skills can mean learning how news catalysts can impact a stock like Palo Alto and how to spot those catalysts.
How experienced are you as a trader? Share your thoughts about Palo Alto’s recent growth — what do see in this stock’s future? Leave a comment below!
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