Palo Alto Networks Inc (NASDAQ: PANW) reported a strong first quarter and raised its full-year guidance last night.
However, shares of the cybersecurity company are still down over 3% at press time.
Famed investor Jim Cramer attributes the sell-off to two potential reasons: profit-taking or expectations of a bigger beat and raise.
Whatever may be at play this morning, he’s convinced the weakness is an opportunity to load up on PANW.
The Mad Money host raised his price target on Palo Alto stock today to $450 which translates to about a 17% upside from here.
Why is Cramer bullish on Palo Alto stock?
Jim Cramer is convinced a broad product portfolio positions this company well to win in cybersecurity that he dubs a “secular growth market … a never-ending arms race.”
Cramer recommends keeping invested in Palo Alto Networks because its management is fully committed to platformization that’s been driving bigger deals.
PANW added 70 new platformizations in its recently concluded quarter to push the total number of such deals up to 1,100.
Cramer expects continued upside in Palo Alto stock as the management delivers on its promise of hitting 2,500 to 3,500 platformizations by the end of fiscal 2030.
Shares of this cybersecurity firm do not currently pay a dividend and, therefore, remain unattractive for income investors.
Palo Alto announces a 2-for-1 stock split
Palo Alto Networks may be an exciting pick also because its management announced plans for a 2-for-1 forward stock split this week.
PANW will commence trading on a split-adjusted basis on December 16th.
Stock splits tend to be positive as they increase liquidity and make shares more affordable and attractive to a wider range of investors.
For example, a retail investor may perceive a $200 stock as more accessible than a $400 stock.
Over the long term, splits may help attract more investors to a stock and result in a share price increase.
Finally, management typically decides in favor of stock splits when they’re confident about growth prospects.
So, the market tends to read a forward split as a sign of insider optimism.
Evercore also sees an upside in PANW to $455
Jim Cramer is not alone in being bullish on Palo Alto Networks.
Analysts at Evercore ISI also raised their price target on PANW this week to $455.
The investment firm also cited rising momentum in the company’s platformization strategy for its constructive view in its recent research note.
Plus, the Nasdaq-listed firm raised its guidance for the full year last night to revenue in the range of $9.12 billion to $9.17 billion on up to $6.39 a share of adjusted per-share earnings.
Analysts had called for $9.13 billion and $6.28 per share, respectively.
The management’s confidence also bodes well for what the future holds for Palo Alto stock.
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