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Watch Out: Barbarians At The Gate For Palo Alto Networks (PANW)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Palo Alto Networks ( PANW) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Palo Alto Networks as such a stock due to the following factors:

  • PANW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.5 million.
  • PANW has traded 1.6 million shares today.
  • PANW traded in a range 289.8% of the normal price range with a price range of $3.07.
  • PANW traded above its daily resistance level (quality: 30 days, meaning that the stock is crossing a resistance level set by the last 30 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in PANW with the Ticky from Trade-Ideas. See the FREE profile for PANW NOW at Trade-Ideas

More details on PANW:

Palo Alto Networks, Inc. offers a network security platform in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. The company's platform comprises Next-Generation Firewall that delivers application, user, and content visibility and control. Currently there are 11 analysts that rate Palo Alto Networks a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Palo Alto Networks has been 990,300 shares per day over the past 30 days. Palo Alto has a market cap of $3.0 billion and is part of the technology sector and computer hardware industry. Shares are down 22.6% year to date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Palo Alto Networks as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 244.3% when compared to the same quarter one year ago, falling from -$4.60 million to -$15.84 million.
  • The share price of PALO ALTO NETWORKS INC has not done very well: it is down 23.40% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • PALO ALTO NETWORKS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PALO ALTO NETWORKS INC reported poor results of -$0.41 versus -$0.06 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.41).
  • Compared to other companies in the Communications Equipment industry and the overall market, PALO ALTO NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for PALO ALTO NETWORKS INC is currently very high, coming in at 75.45%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -14.09% is in-line with the industry average.

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