Cybersecurity firm Palo Alto Networks set for worst day after forecast cut (updated)

Check Point Software Technologies

21/02/2024 15:37

(Updates share movement)
       Feb 21 (Reuters) - 
    Palo Alto Networks  PANW.O  was headed for its biggest
one-day share drop on Wednesday and sparked a selloff in
cybersecurity stocks after softer client spending and steep
promotions forced the company to cut its annual billings
forecast. 
  
    Shares of the company fell more than 26% in early trading,
putting it on course to erase nearly $30 billion in market
value. Rivals such as Zscaler  ZS.O , Check Point Software
 CHKP.O  and CrowdStrike  CRWD.O  dropped between 4% and 9%. 
    Analysts pegged Tuesday's forecast cut on the company's plan
to offer up to six months of free services to customers who are
switching to its one-stop-shop platform for cybersecurity
products.    
    Cybersecurity firms are combining their offerings into a
unified platform to cater to customers that are tired of buying
products from different vendors and still facing security
breaches.
    "The strategy makes sense, and it aligns with strategies we
have seen other platform vendors deploying, but we expect Palo
Alto Networks stock will remain under pressure for a while as
the change is contributing to a cut to billings guidance," J.P.
Morgan analysts said in a client note. 
    The results also took a hit from a slowdown in the company's
business which caters to the U.S. federal government, a trend
which CEO Nikesh Arora said would likely continue until
mid-2024.
        At least 18 brokerages lowered their price targets on
the stock, pulling down the median view to $340, according to
LSEG data. Its shares ended trading at $366.09 on Tuesday.
    The stock trades at a forward price-to-earnings ratio of
about 60, compared with Zscaler's 89.1 and CrowdStrike's 85.47.
    
    

 (Reporting by Aditya Soni in Bengaluru; Editing by Devika
Syamnath)
 ((Aditya.Soni@thomsonreuters.com; +91 80 6210 0555;))