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August 25, 2022, Palo Alto Networks, Inc.(NASDAQ:PANW) and Fortinet, Inc. (NASDAQ:FTNT)
These two cybersecurity plays offer different types of upside as the best stocks to buy now.
As the Dow, S&P, and Nasdaq all saw mild gains on Wednesday (August 24, 2022), the market ended its three-day losing streak. What we’re seeing now is the market trying to figure itself out. In other words, are we going back to a bear market and will the Fed hike the economy into a recession. We’re also seeing that cyber security is proving to be a resilient sector because of all the chaos in the world today. That’s why Palo Alto Networks, Inc.(NASDAQ:PANW) and Fortinet, Inc. (NASDAQ:FTNT) could be the best stocks to buy now.
No matter what the economic climate is, cybersecurity is essential. We’re all at risk from cyber-attacks from friendly folks like Russia, China, Iran, and North Korea, whether we like it or not.
With the global cybersecurity industry potentially worth $376.32 Billion by 2029 and growing at a 13.4% CAGR, Palo Alto Networks and Fortinet are right on the front lines.
If you’re more of a momentum investor, PANW is your pick. The stock’s broken out by 33.98% since its low of $421.55 on May 19, 2022, and just set the world on fire with a 12.1% one-day gain following its latest earnings report. 19 analysts boosted their price targets on this stock after its earnings. Now it could be staring at a 32+% upside.
Fortinet is more for value and fundamental investors. The stock may not have the recent performance as PANW, but it offers considerably stronger fundamentals and trades at a much cheaper cost closer to its lows. It could also have a 46+% potential upside.
You can’t go wrong either way. Both stocks are powering a cybersecurity movement and have unique qualities as the best stocks to buy now.
Palo Alto Networks, Inc.(NASDAQ:PANW)
A STRONG BUY with a 32+% potential upside has analysts boosting price targets in droves.
In today’s uncertain geopolitical environment, where thousands upon thousands of attempted cyberattacks happen that we probably don’t even know about, calling Palo Alto Networks essential is an understatement.
An international provider of cybersecurity solutions, PANW is positioned as one of the best stocks to buy now not only because of the importance of its operations. It’s one of the best stocks to buy now because it crushed its Q4 earnings report while already having red-hot momentum. Since touching its low of $421.55, the stock has rocketed 33.98%, including a 12.1% one-day gain following said earnings.
Beyond the strong earnings and the sexy charts, PANW also provides:
- A high shareholder yield.
- Bullish technical indicators.
- Recent analyst upgrades that almost unanimously show considerable upside.
Clearly, we’re not the only ones who see PANW as one of the best stocks to buy now.
Especially once it goes through with a 3-1 stock split.
PANW’s Colossal Earnings Beat Signals Resilience and Triple-Digit Growth Potential
There’s a reason why Palo Alto Networks closed over 12% higher following its latest earnings report on August 22, 2022.
The cybersecurity giant reported $2.39 EPS beating the consensus estimate of $2.28 by $0.11 and marking a stunning 49.38% year-over-year increase. Revenue also came in at $1.55 billion for the quarter, primarily in line with analyst projections and marking a 27.2% year-over-year increase.
With investors getting a significant reminder of why Palo Alto Networks and its plethora of cybersecurity and technological solutions are leading the way in a booming industry, Palo Alto Networks once again proves itself as a behemoth built to weather any economic storm. With the Company also announcing a 3-1 stock split that could make it more accessible to retail investors, the potential is incredible. Perhaps that explains why its earnings could grow by a whopping 198.63% in the coming year.
Strong Cash Flows, Shareholder Yields, and Technicals
Even though PANW’s margins won’t excite many fundamental or value investors, what’s undeniable is that it’s a well-run company with strong cash flows that prioritizes its shareholders. A high-growth company that still manages a 3.2% free cash flow yield and a 7.8% shareholder yield is to be commended.
But beyond these strong cash flow indicators, the stock has passed all its support levels and remains roughly $10 a share below its first resistance point. Additionally, several other technical indicators signal that PANW is a BUY, such as its
- 20 Day Moving Average
- 20 – 50 Day MACD Oscillator
- 50 Day Moving Average
- 100 Day Moving Average
- 150 Day Moving Average
- 200 Day Moving Average
A STRONG BUY With 18 Price Target Upgrades Signaling a 32+% Breakout
On August 23, 2022, PANW received a whopping 18 analyst price target increases after its earnings. The highest of the bunch came from Wells Fargo analyst Andrew Nowinski, who bumped his price target from $700.00 to $750.00, representing a 32.79% upside from August 24, 2022’s $564.81 closing price.
The 17 other analysts who upgraded their coverage include:
- Evercore ISI- $620.00
- Wolfe Research- $715.00
- Northland Securities- $733.00
- Wedbush- $620.00
- Guggenheim- $640.00
- Deutsche Bank- $625.00
- Stifel Nicolaus- $645.00
- UBS Group- $590.00
- Mizuho- $660.00
- BMO Capital Markets- $675.00
- Credit Suisse Group- $685.00
- Royal Bank of Canada- $700.00
- Raymond James- $640.00
- Piper Sandler- $690.00
- Citigroup- $640.00
- Barclays- $695.00
- KeyCorp- $680.00
According to TipRanks, PANW is a STRONG BUY because an overwhelming 24 out of 25 Wall Street analysts offering 12-month price targets for Palo Alto Networks in the last 3-months rated it a BUY. Based on these analyst ratings, PANW currently has a high price target of $823.00, a low of $590.00, and an average of $674.00. The average price target represents a 19.33% upside from August 24, 2022’s close.
PANW’s year-to-date low and high are $421.55 and $640.90, respectively.
Fortinet, Inc. (NASDAQ:FTNT)
This cybersecurity play is a cheaper alternative to PANW with more robust fundamentals and a potentially higher 46.29% upside.
There are a few things to love about Fortinet, another company that provides comprehensive, integrated, and automated cybersecurity solutions worldwide.
It goes beyond the fact that it trades over $500 cheaper per share than Palo Alto Networks, too. That will change soon anyways because of PANW’s 3-1 stock split.
For one, FTNT has more substantial fundamental margins than PANW, better cash flows, and a higher average analyst upside.
Even though FTNT doesn’t have the triple-digit earnings growth potential or attractive-looking stock chart that PANW has, it still beat top line and bottom line estimates in its most recent quarterly earnings report (August 3, 2022). It also has a strong growth potential of its own.
Palo Alto Networks’s stock has dwarfed the performance of Fortinet; this is evident. Fortinet is more of a bottom-feeding type of play as it trades closer to its 2022 lows. But don’t let that scare you. You know what the smart ones say. Buy low, sell high.
Especially if it’s a long-term outperformer like Fortinet.
With Fortinet one of, if not the only, value play in the booming cybersecurity space, that alone should make it one of the best stocks to buy now.
A Recent Earnings Beat With Both Top Line and Bottom Line Growth Potential
Fortinet reported its latest earnings about three weeks ago (August 3, 2022), and while they didn’t set the world on fire like PANW’s, they were impressive in their own right.
Moreover, they continued Fortinet’s four-quarter streak of earnings and revenue beats.
Fortinet’s EPS reached $0.24, beating consensus estimates by $0.02 and marking a 26.32% year-over-year increase.
Revenue also came in at $1.03 billion and marked a 28.57% year-over-year increase.
The best part which makes Fortinet one of the best stocks to buy now? Projections show Fortinet’s bottom and top lines continuing to grow.
Revenue could increase at a 21.2% 5-year CAGR, net income is projected to grow 41.4% and average 26.2% over the next five fiscal years, and earnings could rise 23.08% in the coming year.
The Opportunity to Bottom-Feed With Outstanding Financials and Improving Sentiment
FTNT trades -29.87% below its highs, close to its 2022 lows, and with a 35.03 14-day RSI that suggests it’s nearly oversold. However, that makes the case even more potent for it as one of the best stocks to buy now.
First and foremost, the stock has fundamentals that run circles around PANW’s.
Fortinet has a solid 7 out of 9 Piotroski Score, indicating healthy Liquid Balance Sheets, Profitability, and Operating Efficiency, with margins like a 128.4% ROCE and 75.3% gross margin to back it up.
Those weren’t typos either.
Other margins like a 12.4% ROA, 13.3% unlevered ROA, and 18.9% operating margin are also quite respectable.
The Company’s cash flows can also sufficiently cover interest payments, with a decent 2.8% free cash flow yield.
As if you didn’t need more reasons to gawk at its fundamentals, management has also been aggressively buying back shares. Its 6.0% shareholder yield doesn’t hurt either.
Perhaps that’s why short interest in Fortinet has recently decreased by 11.99%, indicating that investors are starting to wake up to the opportunity.
Analysts See a 46+% Upside
TipRanks notes that 18 Wall Street analysts offered 12-month price targets for Fortinet in the last 3 months. Fortinet has a high price target of $85.00, a low of $63.00, and an average of $73.38. The average price target represents a 46.29% upside from August 24, 2022’s $50.16 close.
Several recent price targets, however, are higher than the average, including:
- Evercore ISI- $75.00
- Barclays- $77.00
- Citigroup- $78.00
- Oppenheimer- $80.00
FTNT’s year-to-date low and high are $48.73 and $71.52, respectively.
