Cramer says the buying is “pure panic” over Palo Alto Networks' post-earnings decline

Pamela LoweFebruary 21, 2024

Shares of Palo Alto Networks fell on Wednesday, after a day of printing and complex quarterly forecasts. Jim Cramer said it's time to buy the leading name in cybersecurity, not sell it. The stock fell nearly 27% on Wednesday — on track for its biggest single-day loss in seven years. “We're ready to buy” more Palo Alto Networks shares, Jim said during the morning meeting. “This is panic. When we see pure panic, we're buying pure panic. We're not selling pure panic.” Due to our rules, the club is prohibited from making the purchase for a few more days. But we wanted to tell members about our plan. The decline began after Palo Alto Networks on Tuesday evening reported a slight loss in billings in the second quarter of fiscal 2024, which beat the Street up and down. The declining billing trend began at the end of the first quarter, worsened in the second quarter, and is expected to continue into the second half of the fiscal year. The company also missed estimates for its fiscal third quarter and full-year forecasts for revenue and earnings per share. Mountain Palo Alto Networks' (PANW) YTD PANW Performance To address the evolving dynamics of the cybersecurity industry, CEO Nikesh Arora detailed the shift toward what he calls a “platform.” The Palo Alto company is changing its strategy by selling a unified cybersecurity platform to accelerate consolidation in the sector. This comes with further discounts on the company's products in the near term, with offers such as allowing customers to try certain offers for free. Although this represents a short-term hit to billings and revenue growth, this will boost Palo Alto's lead among its peers in the long term. “I feel very strongly that what he's doing is the right thing,” Jim said of Arora's new approach, citing the CEO's distinguished leadership record. The club upgraded the stock back to our rating equivalent to Buy 1 following Tuesday evening's earnings release and stock moves. Jim sees the stock decline as a buying opportunity because the Palo Alto company continues to dominate an industry that is in high demand. Cyber attacks, hacking and breaches are on the rise. Bad actors, some of whom are sponsored by nation-states, are becoming more sophisticated. What's even more reassuring is that Arora doesn't seem concerned about the market's reaction or the health of the company's business. “Sometimes you have to merge to get out and double down from there. I'm not worried about the stock price,” Arora said during “Mad Money” on Tuesday. “Let's get back to basics. Our business is strong, demand is strong. … There is no cybersecurity cliff.” While Palo Alto Networks was suffering a double-digit percentage loss on Wednesday, shares have remained up more than 61% over the past 12 months. The stock has more than doubled in 2023. (Jim Cramer's Charitable Trust is long PANW. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim places a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charitable fund's portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. The above Investment Club information is subject to our Terms and Conditions and Privacy Policy, as well as our Disclaimer. No obligation or fiduciary duty exists or is created by your receipt of any information provided in connection with the Investment Club. No specific results or profits are guaranteed.

In this illustration, the logo of cybersecurity company Palo Alto Networks is displayed on a smartphone.

Rafael Henrique SOPA Photos | Rocket Lite | Getty Images

Palo Alto Networks It dropped on Wednesday, after a day of complicated quarterly printing and forecasts. Jim Cramer said it's time to buy the leading name in cybersecurity, not sell it.

Pamela Lowe

“Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff.”

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