Your portfolios in brief
This week, we chose to talk about Palo Alto Networks (PANW). The cybersecurity software company reported better-than-expected quarterly sales and earnings on February 21. Palo Alto Networks recorded its third consecutive quarterly gain, sending its stock up 12.50% on the announcement of its results.
Here are the takeaways from Palo Alto's quarterly report:
- Earnings: $1.05 per share adjusted, versus 78 cents per share, as expected by analysts, according to Refinitiv.
- Revenues: $1.66 billion, compared with analysts' expectations of $1.65 billion, according to Refinitiv.
Its revenue grew 26% in one year, proving that it is possible to be effective in uncertain times without sacrificing growth or investment. The arrival of chatGPT has shaken up the AI world, and tech companies are each trying to integrate this new technology in their own way. Palo Alto launched its Cortex XSIAM platform last year to position itself well in AI. The company announced that it has closed $30 million worth of deals for its XSIAM platform and is expected to continue this pace of deals in the coming months as demand for this type of software grows.
The AI revolution is well underway at Palo Alto and XSIAM is positioned to be another growth catalyst for the company's long-term prospects. Supply chain pressure has eased, offering a fairly interesting forecast for the coming quarters as the company continues to look to operate efficiently. In addition, according to internet magazine Cybersecurity Ventures, global cybercrime costs would increase from $3 billion in 2015 to $10.5 billion annually by 2025, a compound annual growth rate of 13.4 percent. Thus, demand for cybercrime products is on the rise as companies cannot afford to pay ransom in an increasingly difficult economic environment.
The stock is up 32% since the beginning of the year, which is why it has a prominent place in our portfolio.
Despite a good start to the week, all three major indices closed Tuesday's session lower. The stock market had a good start to 2023 as the S&P 500 posted gains of 6%. However, a sharp rise in Treasury yields in February, combined with a Fed that continues to keep interest rates high, is rattling investors. As a result, the indices closed the month lower, with the S&P 500 falling 2.61%, the Dow down 4.19% and the Nasdaq down 1.11%.
It is important to note that February tends to be a bearish month. According to the Trader Almanac, despite some gains for the markets in the middle of the month, February rarely turns out to be a positive month for the indices.
After a good January, and a down month in February, many feel that March could see some gains. "If the upcoming economic data shows a slowdown in inflation, the indices could have a good month. The next Fed meeting on March 21 should provide us with some key indicators on the economic health of the U.S. that will give investors a better perspective," said Philippe Pratte, President and Portfolio Manager.
On Wednesday, markets closed lower as the 10-year yield rose above the psychological 4 percent threshold, sparking fears among investors. The 10-year yield, which helps set rates on everything from mortgages to corporate debt, had reached that high last November. The markets are very sensitive to rising bond yields, and as we have seen this week, when they rise, the indices fall.
Despite opening lower on Thursday, the indices rallied in the early afternoon after Atlanta Federal Reserve President Raphael Bostic said he was "firmly" in favor of sticking with quarter-point increases. This was not enough to make investors happy and they started to buy quickly, allowing the indices to recover their loss from the beginning of the session.
"With the amount of bad news already anticipated in the market, the slightest improvement in an inflation-related data point or a dovish comment from a Fed official tends to cause the markets to react strongly to the upside. In yesterday's excitement, our portfolios reacted very well, ending the day in the green. However, we remain in a very volatile environment for the next few months," explains Philippe Pratte.
The markets were up on Friday, on their way to a positive week. So here is the average for the week for the three major U.S. indices as of 1:30 p.m. Friday.
And here's the average for the week for the TSX in Canada.