Upward trend holds for Palo Alto Networks after earnings
Santa Clara-based Palo Alto Networks (NYSE: PANW) reported earnings on September 4. The software security firm beat both earnings and revenue estimates for the fiscal fourth quarter, but the forward guidance was a little below analysts’ estimates. The overall reaction from investors was a positive one as the stock jumped when it opened for trading on September 5.
Looking at the weekly chart for Palo Alto, we see that the stock was trading just above its 104-week (two years of data) moving average and just above a trend line that connects the lows from the last three years. The bounce after the earnings report allowed the two support levels to remain in place as the stock moved back above its 52-week moving average.
The weekly overbought/oversold indicators had dropped down in the four weeks heading in to the earnings report, but they hadn’t reached oversold territory. Over the last three and a half years, the 10-week RSI has only been in oversold territory on two occasions. The weekly stochastic readings have been there five times in the same time period.
Tickeron’s Technical Analysis overview shows several additional bullish signs for Palo Alto and those indications are based on the daily indicators. The stochastic indicators made a bullish crossover and that suggests the stock may be in a reversal from a downtrend to an uptrend. In 38 of 50 cases where Palo Alto's stochastic indicator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued uptrend are 76%.
Following a 3-day advance, the price is estimated to grow further. Considering data from situations where Palo Alto advanced for three days, in 261 of 356 cases, the price rose further within the following month. The odds of a continued uptrend are 73%.
The RSI Indicator points to a transition from a downtrend to an uptrend -- in cases where Palo Alto's RSI indicator exited the oversold zone, 10 of 14 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued Uptrend are 71%.
Fundamentally, the company has performed extremely well over the last few years. Earnings have grown by a rate of 46% annually over the last three years and they were up by 10% in the fourth quarter. Sales increased by 22% in the fourth quarter and have increased by an average of 28% per year over the last three years.
In addition to the strong earnings and sales growth, the company’s management efficiency measurements are well above average as well. The company boasts a return on equity of 42.3% and the profit margin is at 23.1%.
Sentiment toward Palo Alto is mixed at this time. Analysts are pretty bullish on the stock with 30 out of 35 analysts rating the stock as a “buy”. There are four “hold” ratings and one “sell” rating. This puts the buy percentage at 85.7% and that is well above average.
The short interest ratio is at 4.3 currently and that is slightly above average. I wrote about Palo Alto back in November ahead of another earnings report and the short interest ratio back then was at 2.8. This means that pessimism toward the stock is higher than the average stock and investors have been getting more bearish over the last nine months.
The put/call ratio for Palo Alto was at 1.35 ahead of the earnings report and that is higher than the average stock and is indicative of pessimism. There were 42,170 puts open at the time and 31,241 calls open.
With the combination of solid fundamentals, an upward trend on the stock, and an overall bearish sentiment from short sellers and option traders, Palo Alto looks poised to continue its upward trend.
PANW's RSI Indicator stays in oversold zone for 1 day
It is expected that a price bounce should occur soon.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 12 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where PANW advanced for three days, in of 365 cases, the price rose further within the following month. The odds of a continued upward trend are .
PANW may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on December 18, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on PANW as a result. In of 78 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
PANW moved below its 50-day moving average on December 18, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for PANW crossed bearishly below the 50-day moving average on December 27, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 15 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where PANW declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 87, placing this stock better than average.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. PANW’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (20.704) is normal, around the industry mean (31.338). P/E Ratio (43.226) is within average values for comparable stocks, (158.237). Projected Growth (PEG Ratio) (1.117) is also within normal values, averaging (2.763). Dividend Yield (0.000) settles around the average of (0.084) among similar stocks. P/S Ratio (13.038) is also within normal values, averaging (58.727).
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
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a provider of network security solutions
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