More Capital Gains Potential for Cybersecurity, Palo Alto Stock?
Institutional investors love cybersecurity and existing winners like Palo Alto Networks Inc. (NYSE:PANW) are a top choice for traders and aggressive investors alike. But is PANW stock still a top play in its area and is cybersecurity still poised for more capital gains ahead?
Cybersecurity remains a growth business. It’s a top subsector in information technology and some exposure to this burgeoning industry is worthwhile for those portfolios comfortable with higher investment risk.
Palo Alto Networks is actually off its recently achieved all-time record-high on the stock market and PANW stock is now in a well-deserved price consolidation after some very good capital gains.
Is there room for more gains in this position? I think this stock can do very well in 2016.
PANW Stock: By the Numbers
For upcoming reporting periods, including this fiscal year and next, Wall Street earnings estimates have been ticking higher.
For the company’s fiscal 2016, which ends this upcoming July, Palo Alto Networks is expected to generate more than 40% in comparable revenue growth.
What the company does is sell its cybersecurity products and services to distributors, which in turn re-sell its firewall technology, platforms, and hardware to customers. According to the company, it has some 21,000 customers in industries like financial services, government sectors, education, healthcare, media, and telecommunications.
The chart for Palo Alto stock is featured below:
Chart courtesy of www.StockCharts.com
I think PANW stock would benefit tremendously from a two-for-one share split. The stock is liquid enough now, with average daily trading volume of around 1.5 million shares a day. But more liquidity is always helpful.
This stock can really move—in both directions. Typically, on news of a major data breach at a brand-name enterprise or government agency, cybersecurity stocks take off. A position like PANW stock is highly tradable for those who are inclined.
The company’s recently finished quarter was its first fiscal quarter of 2016 (ended October 31, 2015). During this period, total quarterly sales grew a substantial 55% comparatively to a record $297 million. The company’s total billings during the quarter improved even more so.
Palo Alto Networks is actually still incurring losses ($39.0 million, or $0.45 per diluted share, in its latest quarter), because management is investing heavily in new research and development.
This is especially the case in drumming up new business. Sales and marketing expenses in the company’s 2016 fiscal first quarter totaled $158 million, which is substantial.
The Bottom Line on PANW Stock
With plenty of cash on hand and a robust corporate outlook, PANW stock is well positioned. As mentioned, a share split would be helpful, but in the meantime, the stock remains highly tradable with a strong following from the Street.
There are several other players in the cybersecurity universe that have also done well on the stock market, too, but Palo Alto Networks has the scale and the Street following to take both its business and share price to the next level.
Cybersecurity is one of the more robust areas of the information technology sector. If Palo Alto Networks can transition to profitability late this fiscal year, PANW stock should see renewed price momentum.
(Please note that this article is not meant as a buy recommendation; rather, it is meant to highlight the kind of cybersecurity stock investors interested in the industry may want to consider researching further.)