Palo Alto Stock Has Bulls Buzzing after Q3 Beat

PANW is inching closer to all-time high territory

by Jake Scott

Published on May 22, 2020 at 10:16 AM

Palo Alto Networks Inc (NYSE:PANW) chimed in with earnings after last night's close, and things are looking even better for a company that's already up 40% for the quarter.  The cybersecurity platform posted fiscal third-quarter earnings of $1.17 on $869.40 billion in revenue, both of which decimated Wall Street's estimations. CEO Nikesh Arora spoke regarding the company's position in a post-COVID 19 world, noting PANW could leverage the acceleration to "remote working models, shift to the cloud, and focus on AI/ML and automation to drive effective cybersecurity outcomes."

In response, PANW is up 5.1% to trade at $241.40 this morning, on track to nearly fill a sharp late-February post-earnings bear gap. Analysts have dive-bombed the security with bull notes today; no fewer than 15 brokerages have upped their price targets this morning. The highest comes from D.A. Davidson to $290 from $270.

Palo Alto stock has been rising on the charts since the broader market's mid-March three-year low at just above the $125 level. Now up a staggering 82.9% from that low, PANW is edging closer to its Feb. 19 all-time high of $251.10, guided higher by its supportive 10-day moving average.

The deluge of bull notes today is impressive considering analysts were extremely bullish on Palo Alto stock going into today. Of the 28 in coverage, 19 sport a "buy" or better, with not a "sell" to be seen. Meanwhile, the 12-month consensus price target of $252.45 is a lofty 10% premium to last night's close. 

Palo Alto's options pits are bubbling over today in response to the earnings report. In just the first hour of trading, over 8,500 options have changed hands, eight times the average intraday amount and volume pacing for the 99th percentile of its annual range. Leading the charge is the weekly 5/22 250-strike call, but there are also new positions being opened at the 245-strike call from the same series.

It's no surprise that calls are dominating at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, 4.41 calls have been bought for every put in the past 10 days, a ratio that sits in the 98th percentile of its annual range. This suggests that calls are being picked up at a faster-than-usual pace of late.

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