Palo Alto Networks and Nvidia will be a big market driver this week with earnings.
PANW – Daily Chart
PANW has been among the big gainers in tech, with a 115% rise over the last year. Investors should be careful about these elevated prices, but trading opportunities will be good.
Palo Alto focuses on cybersecurity, and the increasing growth in cloud solutions has seen increased billings for the company. The company releases its earnings on Tuesday after the US close, with chip maker Nvidia releasing its earnings on Wednesday after the bell.
That gives traders time to plan a strategy for a further bullish burst in price or a disappointing price dump.
Analysts expect a year-over-year increase in the top and bottom line results at Palo Alto, with earnings per share of $1.30 and revenue of $1.97 billion. The focus will be on billings and expanding cyber budgets, demand, and pressure on firms from insurers, which is expected to continue the trend.
The billings are essential because the company has yet to meet expectations over the last two quarters. “Last quarter, more customers chose 1-year payment plans versus financing deals through PANFS, creating a headwind to billings,” said Wells Fargo.
“PANW continues to benefit from strong enterprise demand for Security, favourable exposure to high priority CIO spending categories, and consolidation of market share across its platform, but cyclical Network Security spending remains a headwind,” J.P. Morgan added.
Analysts at Wedbush also believe a $200 billion growth opportunity in cloud security is “up for grabs” over the next few years.
The company must prove that those trends are actual, or they could see the share price and valuation tumble.
That will bring us along to Nvidia, which will have a more significant impact on the market. AI demand and soaring valuations have been built on the front-end demand for chips. There still needs to be more proof that the new products will be desired by customers willing to pay premium prices for an AI assistant. Other issues, such as the China ban on specific chips, saw demand being front-loaded, and any cracks in the demand picture for Nvidia would shake the entire Nasdaq.
