We’re trimming a cybersecurity stock that’s rallied into earnings
Shortly after the opening bell, we will be selling 25 shares of Palo Alto Networks at roughly $315.50. Following the trade, Jim Cramer’s Charitable Trust will own 275 shares of PANW, decreasing its weighting in the portfolio to 2.67% from 2.90%. We talked Wednesday on our Morning Meeting about how Palo Alto Networks may have a positive setup into earnings Monday night , according to Morgan Stanley. The analysts pointed to conservative estimates after the company cut its full-year outlook last quarter and large deal momentum per their industry checks, resulting in what could be a bigger-than-normal billings beat. For our part, we’ve been repeatedly noted Palo Alto’s involvement in helping UnitedHealth Group with its major hack this year. We thought Morgan Stanley’s call was pointing out because into earnings in February, Morgan Stanley said it was “sitting this quarter out.” Its call proved prescient when Palo Alto shares fell almost 30% in a single session after missing estimates on billings and reducing its outlook. We added to our Palo Alto Networks position twice since that sell-off, buying 25 shares at around $298 in late February and another 25 shares at $268 in April. On an average, the two purchases came at about $283 per share. Although Morgan Stanley has us feeling bullish into earnings, we’re selling a little bit here and moving our rating back to 2 because the stock has already made a strong move this week. The stock has climbed more than 17% since April 4 and is up about 5% over the past three sessions alone. And in early trading Thursday, it looks like it will tack on another percent and change after announcing a deal to buy the cloud security software assets from IBM alongside an expanded partnership between the two tech companies. Many analysts are positive on the move. For example, Morgan Stanley says this deal benefits Palo Alto it several ways, helping it accelerate market share in security analytics. It’s also a win for the company’s “platformization” strategy — a key theme in the wake of its February earnings report — because IBM said it will expand its deployment for Palo Alto security products. We’ll realize a gain of 77% on stock purchased in February 2023. (Jim Cramer’s Charitable Trust is long PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
