Editors Note:

We are still waiting for the market to pick a direction and for the earnings parade to pass us by. The markets appear to be weakening rather than their normal bullish bias for the last week of October. If we do end up with a decent dip on election uncertainty I hope it is not for another week or two. We need to get the majority of the earnings cycle behind us so we can add some new plays. Trying to add new positions over the next two weeks is like trying to play hot potato with a lit firecracker. We do not want to add a company the week before they report earnings.


New Watch List Entry:


      No New Watch List Entries


Stocks Dropped from Watch List:


      No Watch List Drops


Active Watch List Play Descriptions:


PANW - Palo Alto Networks - Company Profile

Comments:

Shares of PANW crashed after an guidance warning by Fortinet. We were stopped out of the prior position on Oct 12th when support was penetrated intraday. I put this position back on the watch list and we will reenter on a rebound.

Shares tried to mount a rebound last week but remain well below our entry trigger at $155.50.

Original Trade Description: September 25th.

Palo Alto Networks, Inc. provides security platform solutions to enterprises, service providers, and government entities worldwide. Its platform includes Next-Generation Firewall that delivers application, user, and content visibility and control, as well as protection against network-based cyber threats; Advanced Endpoint Protection, which prevents cyber attacks that exploit software vulnerabilities on various fixed and virtual endpoints and servers; and Threat Intelligence Cloud, which offers central intelligence capabilities, security for software as a service applications, and automated delivery of preventative measures against cyber attacks. The company provides firewall appliances; Panorama, a security management solution for the control of appliances deployed on an end-customer's network as a virtual or a physical appliance; and Virtual System Upgrades, which are available as an extensions to the virtual system capacity that ships with the physical appliances. It also offers subscription services covering the areas of threat prevention, uniform resource filtering, malware and persistent threat, laptop and mobile device, and firewall protection services, as well as cyber attack, threat intelligence, and content control services. In addition, the company provides support and maintenance services; and professional services, including application traffic management, solution design and planning, configuration, and firewall migration, as well as provides online and classroom-style education training services. Palo Alto Networks, Inc. primarily sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries comprising education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Company description from FinViz.com

Cybersecurity stocks have come back into focus after all the cyberhacks over the last three months starting with the DNCC servers. Yahoo announced the theft of 500 million accounts last week.

Palo Alto offers state of the art firewalls for more than 31,000 customers in 140 countries, including the Dept of Defense and other high profile security agencies around the world. After Q2 they reported earnings of 50 cents that was in line with estimates. Revenue of $400.8 million rose 41.2% and beat estimates.

Detailed billing rose 45% year over year to $572 million and free cash flow spiked 72% to $171 million.

PANW is growing very rapidly and every time a new cyberhack is in the headlines they are going to get more phone calls from people looking for help. Their subscription services are also growing strongly because protecting against a hack is not a onetime procedure. It is an everlasting effort that requires daily updates and monitoring.

Earnings Nov 23rd.

Shares dipped to $147 on the Fortinet warning. They rebounded to $154 and then faded with the weak market. I am putting an upside entry trigger on the position. If shares continue to decline I will look at buying a deeper dip to $144 or even $130 depending on where a bottom appears.

With a PANW trade at $155.50

Buy March $165 call, currently $8.90, no initial stop loss.
Short March $185 call, currently $2.95, no initial stop loss.
Net debit $5.95.