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Wed, February 8 at 8:00PM ET

PANW, ZS, CRWD: Cybersecurity Stocks Surge on Positive Palo Alto Network Earnings

  • Palo Alto Networks (NASDAQ:PANW) just reported positive earnings
  • These statistics reflect an increase in demand for digital security services
  • Other cybersecurity stocks are rising on the momentum this morning
An image of the word cybersecurity overlaid over a pixelated background, images of locks and shields and virus icons surrounding it
Source: BeeBright / Shutterstock

An impressive Q3 earnings report has Palo Alto Networks (NASDAQ:PANW) surging this morning. The Silicon Valley-based company surpassed Wall Street expectations on both top and bottom lines as well as full-year guidance. It rose in after-hours trading yesterday and is still moving upward this morning. Other prominent cybersecurity stocks are rising today in premarket trading on the momentum generated by this news.

What’s Happening With Cybersecurity Stocks

PANW is among this morning’s premarket movers, and has surged more than 12% as of this writing since markets opened. But two of its peers are demonstrating impressive performances as well. CrowdStrike Holdings (NASDAQ:CRWD) is up 9% at the time of writing, and Zscaler (NASDAQ:ZS) has risen more than 8%. Neither name has any company-specific news to report this morning. This is a clear case of the halo effect, in which investors embrace one stock because a similar one has performed well. CRWD and ZS are in focus after PANW reminded Wall Street why cybersecurity stocks are worth watching.

Let’s take a closer look at what the company reported.

Why It Matters

As noted, Palo Alto’s earnings shot past Wall Street expectations in many important categories. It reported earnings of $1.79 per share after analysts predicted $1.68. Revenue came in at $1.39 billion, opposite Wall Street’s forecast of $1.36 billion. For quarterly revenue, this represented a gain of 29%, while fiscal third-quarter billings reached $1.8 billion, a 40% gain.

In a statement released by the company, Chairman and Chief Executive Officer (CEO) Nikesh Arora noted,

“We saw strong top-line growth in Q3, which is a testament to our teams’ consistent execution in capitalizing on the strong cybersecurity demand trends. On the back of this strength across our portfolio, we are again raising our guidance for the year across revenue, billings and earnings per share.”

It is not at all surprising that a leader in the cybersecurity space performed so well during the previous quarter. Russia’s invasion of Ukraine has driven a surge in demand for cybersecurity services as companies sprung into action to protect their data from Russian hackers. This was true throughout both the U.S. and Europe. Many nations feared digital attacks from Russia due to increasing economic sanctions. Arora confirmed on a conference call with analysts that Palo Alto has seen an increase in interest from both private-sector and public-sector clients across Europe as the crisis has escalated.

But that hasn’t been the company’s only positive catalyst. In March 2022, Palo Alto announced the launch of Prisma Cloud Supply Chain Security. According to a statement released by the company, the program allows organizations to detect supply chain problems in order to properly trace and deal with them. It aims to help companies protect themselves from attacks on their software supply chains.

What It Means for Cybersecurity Stocks

What we’ve seen from cybersecurity stocks this morning is an important reminder of the power of the halo effect. When a sector leader has a strong growth catalyst, it generates the type of momentum that smaller peers can ride to the top. PANW’s earnings are impressive, and this growth isn’t likely to stop anytime soon.

As InvestorPlace’s Louis Navellier recently noted, the demand for its services is not about to die down. “This growing cybersecurity threat by state-sponsored hackers is bad news for us, but good news for Palo Alto Networks,” he stated.

Navellier is bullish on PANW, but all three cybersecurity stocks are worth watching within the coming quarter. These companies are arming both private-sector and public-sector clients with the tools they need. Almost everyone is worried about cyberattacks these days.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/panw-zs-crwd-cybersecurity-stocks-surge-on-positive-palo-alto-network-earnings/.

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