Ticker Reports for November 21st
Why Palo Alto Networks' Multi-Year Uptrend Is Far From Over
Palo Alto Network’s (NASDAQ: PANW) stock price has been in a multi-year uptrend that will continue for many more years because of its leadership position in cybersecurity. It is the world’s leading cybersecurity provider, and its business is supported by the increasing use of digitization by businesses and industries, compounded by the exponential rise in cyber threats. The latest data shows cybersecurity incidents accelerating above 50% in 2024 and are expected to continue growing, aided by AI. With the rise in threat comes an increase in time and cost to mitigate, making cybersecurity and Palo Alto vital to the global economy.
Platformization Drives Multi-Year Trend in Cybersecurity
Palo Alto’s FQ1 results prove that its shift to platformization was the right move. The company’s CEO says platformization is critical to cybersecurity outcomes, and businesses have come to realize it. This means a 13.8% increase in quarterly revenue compared to last year for Palo Alto, driven by high-double-digit increases in NextGen Security ARR and RPO. ARR in the company’s critical offerings is up 40% year-over-year (YoY) to $4.5 billion, about 50% of the expected annual revenue, with total revenue growth accelerating sequentially from the previous quarter. Product sales grew by 3.7%, while subscriptions, which include the NextGen offerings, are up by 16.1%.
Margin news is good. The company experienced a forecasted contraction in the gross margin due to freebies and price incentives intended to drive NextGen sales but less than expected. The gross margin contracted only 80 basis points and was offset by improved operating results also due to the platformization efforts. GAAP net income is up 76% and adjusted by 13%, with adjusted earnings of $1.56 being $0.08 better than the consensus reported by MarketBeat and up 13% YoY, compounded by favorable guidance.
The company raised its guidance for Q2 and the year because of the developing trends. The company expects NextGen ARR and RPO to sustain high double-digit growth rates in Q2 and the year, putting the target for adjusted EPS at $6.33 or a nickel above the consensus forecast. The salient point is that analysts are impressed with the news, which is fueling an upgrade cycle.
The first analysts’ revisions tracked by MarketBeat include numerous price target increases and an upgrade that aligns with the 2024 trends. The upgrade is from Rosenblatt, which raised the stock to Buy from Hold, aligning with the consensus, and the price target was raised to $425. The $425 target would be another new all-time high for the stock price and a stepping stone to the higher levels indicated by the revision trend. The high-end range puts this stock at $450 within the next 12 months, a 15% upside from the critical support target.
Palo Alto Networks Secures Shareholder Value With Rising Equity
Palo Alto Networks doesn’t pay dividends or buy back significant amounts of stock but provides shareholder value in other ways, investing in and growing the business and shareholder value. Balance sheet highlights from FQ1 include increased cash and assets compounded by a reduction in current and total liability. The net result is a 14.3% increase in shareholder equity in addition to the 24% increase posted last year. Equity is expected to continue growing in F2025 and F2026 because of the revenue growth and cash flow outlook.
The stock price pulled back following the release, showing that the market was expecting the good news. However, the market remains above the critical support level near $380 and will likely confirm support at that level. In that scenario, the market will also confirm a continuation of the uptrend indicated by the break to highs in early November. If not, this market could fall to $360 or lower before regaining traction and continuing the uptrend.
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3 Rock-Solid Buying Opportunities in the Market Right Now
Certain stocks in the market are not supposed to sell off at any time, and some brands and business models are widely known to be rock-solid and relatively immune to volatility. However, every once in a while, the system throws an unexpected event at these companies, rendering most volatility models useless and leaving most investors holding out for answers.
Today, three retail stocks that might easily pass the argument for being more part of the consumer staples sector have sold off on speculations that the newly appointed head of the United States health department will take a negative stance against fast food brands. Despite being somewhat right about these assumptions, it is clear that these stocks might have overreacted to the news, and that’s where value investors can come into play.
The stocks in question are Coca-Cola Co. (NYSE: KO), PepsiCo Inc. (NASDAQ: PEP), and even global franchise giant McDonald’s Co. (NYSE: MCD). It is shocking, but it is true that all three of these stocks participated briefly in the “everything rally” that followed the days after the United States presidential election, only to give up those gains after the new appointment. Here is why the market might have overdone it and where these names head to from here.
Coca-Cola's Global Moat: How Its International Presence Shields Against Market Selloffs
Even in the unlikely scenario that people cut down on Coca-Cola product consumption, despite whatever health-conscious campaigns are launched, Coca-Cola will still be able to cushion and offset these trends with the global presence it has developed and maintained for decades.
More than that, inflation in the United States, as it has threatened to come back recently, could act as another tailwind for the brand to more than makeup for any fall in sales volume. Why? Because market penetration and brand loyalty will trump any necessary price increase to sustain margins, and not a lot of companies can say that today.
Now that Coca-Cola stock trades at only 85% of its 52-week high, a 15% selloff is enough to get Wall Street’s attention, and here’s what investors can look to confirm this. Analysts at Truist Financial decided to reiterate their “Buy” ratings for Coca-Cola stock, this time coupled with higher valuations.
Where they previously valued the stock at $70 a share, a recent view toward outperformance despite all of today’s implications led them to place a $80 price target on Coca-Cola stock. This target calls for a net upside of up to 27% from where it trades today, not to mention a new all-time high.
PepsiCo Stock Hits a Cyclical Low: Why It's an Unmissable Buy Today
This is another name synonymous with Coca-Cola’s international presence. It has enough diversification in other products like energy drinks and snacks to easily offset any and all downside effects from new health-conscious policies in the United States.
Now trading at 87% of its 52-week high, the price relation to highs is not even the best part of this discount story. PepsiCo stock’s forward P/E of 18.7x would be the lowest valuation over the past six years, beaten only by the COVID-19 pandemic selloffs.
To get back to the normal historical average, PepsiCo stock’s forward P/E would have to expand toward 25.0x, a significant boost from where it sits today and exactly where the source of the potential upside will be coming from for PepsiCo investors.
Investors shouldn’t be surprised to learn that analysts at Bank of America recently kept their “Buy” rating for Pepsi stock while also seeing a fair value for it at $185 a share, which represents a 17% upside from where it trades today. As if all this evidence wasn’t enough, there is one more indicator they should be aware of.
That indicator is institutional buying, especially from State Street, which recently added 5.1% to its PepsiCo positions as of November 2024, netting its holdings at a high of $9.7 billion today, or 4.2% ownership in the company.
McDonald’s Stock: Why This Multi-Billion Giant Offers Rare Double-Digit Upside
It isn’t common to see a company as big as McDonald’s, with a market capitalization of $208 billion today, offers a double-digit upside in the market, but that’s just what Wall Street analysts are betting will happen in the coming quarters.
Specifically, those at Truist Financial now see a $342 valuation for McDonald’s stock after rating it a “Buy” in late October 2024. To prove these analysts right, the stock would have to rally by as much as 18% from where it trades today, not to mention make a new all-time high, to join Coca-Cola’s upside.
It goes without saying that the brand’s penetration in just about every economy in the world, plus its convenience and affordability value proposition, makes the stock an undeniable buy in any and all dips. Even the bears know this, hence why McDonald’s short interest declined by as much as 7.4% during the past month alone, signs of bearish capitulation.
So now, whatever story the market wants to attach to these selloffs, it likely won’t hold in front of all this potential upside and strength, and that is one trend investors could—and should—take advantage of today.
Missed Nvidia? Watch this ASAP
This little-known project that Bill Gates has been quietly working on that's about to unleash an AI breakthrough so advanced, it's going to make ChatGPT look like VHS.
But what's even more unbelievable?
I believe it'll make Nvidia's meteoric rise look like a backyard bottle rocket.
TJX Companies Stock Poised to Hit a New High This Year
Tepid guidance or not, the TJX Companies (NYSE: TJX) stock price can hit another new high this year because the retail trends driving it remain in place. Those include growth driven by price-conscious shoppers, outperformance, margin strength, cash flow, and capital returns, which are expected to continue. The guidance was uninspiring for traders but aligned with the trends and robust outlook for capital return, which is good news for investors.
The TJX Company pays dividends and buys back shares in significant quantities, reducing the count by 1.45% in Q3, in addition to the 1.2% reduction post in Q3 of fiscal 2024. The takeaway is that TJX has all the hallmarks of a quality buy-and-hold stock and will likely sustain an uptrend in its share prices indefinitely.
TJX Companies Has a Solid Quarter: Raises Profit Guidance
TJX Companies had a solid quarter, growing revenue by 5.7%, leading the industry by a low-single-digit margin. The net outpaced the consensus reported by MarketBeat on strength in all segments and transaction volume. International was the segment showing the most strength, with comps up by 7% year-over-year (YoY), with Home Goods up 3%, Canada up 2%, and the core Marmaxx segment up 2%. Comps are up 3% systemwide.
Margin is another area of strength, with the gross margin widening 50 basis points, SG&A flat, and the pre-tax profit margin up by 30 bps. The pre-tax profit margin came in at the high end of expectations at 12.3% and is expected to remain solid through the year’s end. The net result is leverage gains on the bottom line, with the GAAP EPS growing by 11% and outpacing consensus by 400 bps.
Guidance is also an arad of strength. The company’s guidance is tepid relative to the consensus forecast but improved from the prior outlook. The revenue forecast was maintained, but the margin is expected to be stronger and drive EPS in the range of $4.15 to $4.17 for the year, or up nearly 8%. The bad news is that analysts had expected $4.17 or higher, but the balance sheet health and capital return outlook offsets it.
The TJX Company Has a Fortress Balance Sheet and Can Sustain Capital Returns in 2025
The TJX Company has a robust cash flow capable of sustaining investments and acquisitions like those made in 2024 while paying shareholders and maintaining balance sheet health. Highlights at the end of Q3 include a cash build, steady inventory, and increased current and total assets. A slight increase in liability offsets the build of assets, but the increase is inconsequential. Long-term debt remains flat, and leverage is low at 0.35x equity, and equity is rising. Shareholder equity increased nearly 20% year-over-year and is expected to continue rising in Q4 and 2025.
Analysts provide a tailwind for TJX stock prices in 2024. The analysts' sentiment has been firm at Moderate Buy all year while the consensus price target steadily rose. The price target is up 30% YoY and points to a mid-single-digit stock price increase from critical resistance levels, which is good for another new all-time high. The recent targets suggest a likely move to the high-end range.
The technical action is favorable. The market for TJX stock fell after the release but quickly rebounded to show support at the 30-day moving average. With this in play and the indicators set up to fire strong bullish crossovers, a move to new highs seems likely. The critical resistance target is near $121; a move above it would trigger the market and likely lead to another sustained rally. In that scenario, this market could easily move to the consensus of $127.50 and continue moving higher over the long term.
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