Trading.biz analyst Rahul Nambiampurath believes that a lot shouldn’t be read into the 26% price drop experienced by the cybersecurity giant — Palo Alto Networks Inc (PANW).
“Despite beating the market’s earnings-per-share expectations by 12.20% and revenue by 0.19% in Q4, 2023, the sharp dip is nothing but a chance to grab PANW at a lower price,” mentions Rahul.
However, Pall Alto Networks Inc. wasn’t the only cybersecurity stock to decline. Here are some of the other players that were impacted:
- CrowdStrike Holdings (CRWD) dipped 9.3%
- Zscaler (ZS) dipped 14.4%
- Check Point Software Technologies (CHKP) dipped 4.60%
- Fortinet (FTNT) dipped 5.50%
Other players like Qualys (QLYS) and CyberArk Software (CYBR) were also impacted.
Unpacking the PANW price dip: Triggers and more
Even though the billings were up by almost 16% in Q4, the company has recalibrated its Q1 2024 estimates to a mere 2%. Rahul believes that when companies like Palo Alto lower billing forecasts and revenue estimates, investors get signals that there might be financial and operational challenges in play.
However, for Palo Alto, this move is based on “Platformization” — a strategy that is heavily biased toward discounted packages. And this move could work in favor of Palo Alto Networks.
“In a space that is getting saturated with customers getting tired of spending more and more on cyber threat mitigation strategies, Palo Alto’s Platformization strategy might end up encouraging loyalty and customer adoption,” states Rahul.
What seems like a headwind right now might just be the most bullish drive the cybersecurity space needs in 2024.
What’s the entry point like?
If we pull up the daily chart of PANW, there is a bit more to comprehend than just the overnight price dip. The gap-down opening from the highs of $360 odd to the current trading level of $262.67 might be a bit hard on the recent buyers, but there is hope.
PANW price chart post-dip: TradingView
Even though the dip is sharp, the current price seems to have re-entered the ascending channel, which PANW was steadily forming towards the end of 2023.
If PANW respects the channel’s lower trendline and can take support at $283.26, led by increased buy volumes, new entries can be seen around the $280-$290 levels. If more correction is on the horizon, $229 could offer some strong support.
The chart suggests that this dip might be an opportunity for those who missed the rally, which started at the $282 level when PANW surged from the support level.
Luke Hallard, Lead Advisor at 7Investing, mentions, “As money gets tight, large customers are going to consolidate spending around fewer and fewer suppliers, who can provide more comprehensive capabilities. And this is driving consolidation around companies who are leaders like Palo Alto Networks.”
