My bet that Palo Alto Networks (PANW) represented a long position in the hacking industry paid off big time yesterday.
The Santa Clara, CA based cyber security firm shocked even the most bullish analysts by reporting blowout Q1 earnings.
As of this writing, the shares were up a ballistic 19.65% on the day.
Analysts surveyed by FactSet had forecast earnings of 55 cents a share on revenue of $412.1 million.
For the fourth quarter, Palo Alto Networks forecast adjusted earnings of 78 cents to 80 cents a share on revenue of $481 million to $491 million, while analysts had estimated 74 cents a share on revenue of $485.2 million.
What to do here with the stock now trading at $140?
Buy the next substantial dip, which will inevitably come this summer.
The company’s core products are advanced firewalls designed to provide network security, visibility and granular control of network activity based on application, user, and content identification.
Palo Alto Networks competes in the unified threat management and network security industry against Cisco (CSCO), Fireye (FEYE), Fortinet (FTNT), Check Point (CHKP), Juniper Networks (JNPR), and Cyberoam, among others.
The really interesting thing about this industry is that there really are no losers.
That’s because companies are taking a layered approach to cyber security, parceling out contracts to many of the leading firms at once, looking to hedge their bets.
To say that top management has no idea what these products really do would be a huge understatement. Therefore, they buy all of them.
This makes a basket approach to the industry more feasible than usual. You can do this through buying the $435 million capitalized PureFunds ISE Cyber Security ETF (HACK), which boasts Cyberark Software (CYBR), Infoblox (BLOX), and Fireye (FEYE) as its three largest positions.
(HACK) has been a hedge fund favorite since the Sony attack.
For more information about (HACK), please click here.
And don’t forget to change your password.
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