(Reuters) – Palo Alto Networks surged 12% on Monday after its dominant position in the cybersecurity market helped power a strong forecast, cheering investors worried about possible weakness after it chose a rare summer Friday for its earnings.
Rivals CrowdStrike Holdings and Fortinet also rose 3.2% and 1.5%, respectively, after the report. Palo Alto Networks had declined nearly 17% ahead of earnings this month.
“After much drama about a Friday afternoon release effectively putting the Street on edge in the cyber sector with the murky macro backdrop, Palo Alto printed a relatively strong quarter,” analysts at Wedbush Securities said.
The company on Friday projected full-year billings to be between $10.9 billion and $11.0 billion, above the consensus estimate of $10.80 billion, prompting at least 14 brokerages to upgrade their ratings on the stock.
Expectations were running low for the company after Fortinet earlier this month indicated softening demand for core firewall products, sparking a selloff in the sector.
But as enterprise budgets tighten and threats of cyber attacks intensify, more businesses are turning to larger players like Palo Alto Networks that serve as one-stop shops for a variety of cybersecurity solutions.
“We walk away confident about the company’s ability to consolidate enterprise security spend and outgrow peers with strong profitability,” RBC Capital Markets analysts said.
Wall Street also expects the integration of generative AI into enterprise workflows to be positive for the sector, as it could improve the effectiveness of security platforms.
“We think the emergence of next-generation cloud, data, analytics and AI have set the stage for well-developed platforms to be greater than the sum of their parts,” said J.P.Morgan analysts.
Palo Alto trades at more than 41 times the consensus earnings for the next 12 months, compared with 52.56 for CrowdStrike and 34.19 for Fortinet.
(Reporting by Akash Sriram in Bengaluru; Editing by Pooja Desai)
