If you want to invest in cybersecurity for big-time growth off and on the price chart, it’s time to go with well-positioned up-and-comers Palo Alto Networks (NYSE:PANW) and Fortinet (NASDAQ:FTNT). They’re not entirely two peas in a pod, but cybersecurity plays PANW stock and FTNT stock do share a good deal in common. And that’s a good thing for bullish investors looking to profit from an industry, which sadly enough, is well situated for continued secular growth in an era of ever-increasing inter-connectivity and the very real cyber threats that come with it.
To be sure, investors could go with a safer name like networking-tech giant Cisco (NASDAQ:CSCO) rather than buying PANW or FTNT stock. CSCO has been busy the past couple years aggressively positioning itself within the cybersecurity space. And that’s not all.
Given CSCO’s $231 billion market cap, the idea Cisco could one day be the biggest player in cybersecurity. Wall Street has also been very approving of Cisco’s efforts. Shares hit all-time-highs this week and are up 23% in 2019.
Still, if it’s more secure explosive growth you’re after — PANW stock and FTNT stock are today’s real leaders in cybersecurity and readying for purchase right now.
Cybersecurity Buy #1: PANW Stock
While Cisco obviously has certain alluring qualities to it, eye-popping top-line growth isn’t one of them. Also, given CSCO’s massive girth and decades as a publicly-traded company, even as it builds its cybersecurity portfolio, it’s going to be hard for shares to pull off a second act similar to dot-com era. That’s in sharp contrast to PANW stock.
Off the price chart, in late February, Palo Alto delivered in spades with its earnings report. The outfit boasted double-digit top-line growth, easy profit and revenue beats and issued guidance comfortably above Street forecasts. Be warned though, shares aren’t cheap as InvestorPlace’s Vince Martin notes. Still, the caveat of stock compensation concerns or other strict value metrics are far from unique when it comes to owning a company like PANW stock which is well-positioned for growth.
On the price chart — and unlike CSCO which is still trying to muscle past its all-time-highs from the dot-com boom, PANW has only been around for several years and boasts a large, but not outsized market cap of $23 billion. Palo Alto’s squiggly price line is still more or less in the growth stage of finding sponsorship and interest from Wall Street. But here the story gets even better.
As the monthly view of PANW stock shows, following last month’s well-received earnings report shares broke out of a surly base-on-base cup pattern. On its own, that’s bullish. More recently, the past couple weeks have resulted in a successful test of the breakout with Palo Alto finding technical support near the prior highs. In our view, that’s the icing on the cake for a safer entry into Palo Alto shares.
With PANW trading around $244 and sporting a supportive stochastics set-up, shares are in position to be purchased today. For managing exposure and in the event Vince Martin’s worries come home to roost, I’d suggest using a blended stop-loss of 8%. This does a good job of containing risk and exiting the position if new relative lows (with some wiggle room) are secured beneath the defined pattern support on the price chart.
Cybersecurity Buy #2: FTNT Stock
FTNT stock is our second buy recommendation inside the cybersecurity universe. Similar to PANW stock, Fortinet doesn’t have the aforementioned undesirable baggage of Cisco. For starters, shares have only been available to trade since late 2009. And sporting a market cap of just $14 billion, FTNT stock is an obvious threat with the potential to grow substantially larger over time.
And there’s more yet to like about Fortinet’s future too.
Off the price chart FTNT stock’s latest earnings confessional in early February boasted strong all-around results punctuated by a massive turnaround in profitability and solid top-line double-digit growth. And as with Palo Alto shares, on the price chart, a pattern for future success is shaping up today.
Looking at the monthly chart of FTNT, shares are currently forming a cup-with-handle pattern of about five months in duration. That’s bullish, but that’s not all either. With Fortinet stock’s base having its origins in the market’s broad-based correction in late 2018, the pattern’s depth of 32% while retaining its uptrend and remaining above its prior base high is all the more impressive.
Now and as FTNT stock looks to establish a bonafide handle, shares should be monitored for a breakout purchase above $88.60. Again and as with PANW stock, if Fortinet falters technically and fails to move the needle on its market cap, I’d suggest a stop-loss. My recommendation is the security offered by an exit beneath FTNT’s pattern low of $79.68 which does a great job of managing risks on and off the price chart.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.