S&P 500   5,123.41
DOW   37,983.24
QQQ   438.27
5 Trends You Need to Know This Quarter
MarketBeat Week in Review – 4/8 - 4/12
Faced with possibly paying for news, Google removes links to California news sites for some users
The US and UK restrict the trade of Russian-origin metals
Argentina's populist president meets billionaire Elon Musk in Texas — and a bromance is born
Diplomat tapped as Latvia's new foreign minister as incumbent quits following flights scandal
It's almost April 15. Here's how to reduce stress and get your taxes done
S&P 500   5,123.41
DOW   37,983.24
QQQ   438.27
5 Trends You Need to Know This Quarter
MarketBeat Week in Review – 4/8 - 4/12
Faced with possibly paying for news, Google removes links to California news sites for some users
The US and UK restrict the trade of Russian-origin metals
Argentina's populist president meets billionaire Elon Musk in Texas — and a bromance is born
Diplomat tapped as Latvia's new foreign minister as incumbent quits following flights scandal
It's almost April 15. Here's how to reduce stress and get your taxes done
S&P 500   5,123.41
DOW   37,983.24
QQQ   438.27
5 Trends You Need to Know This Quarter
MarketBeat Week in Review – 4/8 - 4/12
Faced with possibly paying for news, Google removes links to California news sites for some users
The US and UK restrict the trade of Russian-origin metals
Argentina's populist president meets billionaire Elon Musk in Texas — and a bromance is born
Diplomat tapped as Latvia's new foreign minister as incumbent quits following flights scandal
It's almost April 15. Here's how to reduce stress and get your taxes done
S&P 500   5,123.41
DOW   37,983.24
QQQ   438.27
5 Trends You Need to Know This Quarter
MarketBeat Week in Review – 4/8 - 4/12
Faced with possibly paying for news, Google removes links to California news sites for some users
The US and UK restrict the trade of Russian-origin metals
Argentina's populist president meets billionaire Elon Musk in Texas — and a bromance is born
Diplomat tapped as Latvia's new foreign minister as incumbent quits following flights scandal
It's almost April 15. Here's how to reduce stress and get your taxes done

Fortinet Gaps Up, Lifts Optimism About Other Cybersecurity Stocks

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Cybersecurity Stocks

Key Points

  • Cybersecurity specialist Fortinet gapped higher following better-than-expected guidance for the current quarter. 
  • Other techs gapping up in Fortinet's wake are CrowdStrike and Palo Alto Networks.
  • It's not unusual for stocks with similar business models to behave similarly after upbeat news that applies to the entire industry. 
  • 5 stocks we like better than Fortinet

The S&P 500 tech sector is up 18.65% in the past month, with sector component Fortinet NASDAQ: FTNT gapping up 12% on February 8. 

The cybersecurity specialist was the sector’s best price performer in the session, with SolarEdge Technologies Inc. NASDAQ: SEDG, First Solar Inc. NASDAQ: FSLR, CDW Corp. NASDAQ: CDW, and Arista Networks Inc. NYSE: ANET also among biggest gainers.

Fortinet gapped higher following better-than-expected guidance for the current quarter. 

MarketBeat’s list of stocks gapping higher is a great place to scan for ideas. A gap up is almost always accompanied by heavier-than-normal trading volume. A gap higher signals that big institutions have enough conviction in the stock to bid up the price significantly, all at once. 

Other techs gapping up on February 8 included fellow cybersecurity company Palo Alto Networks NASDAQ: PANW, which was up 4.32% mid-session, in double average volume for that time of day.

Palo Alto Networks is not a component of the S&P 500, even though its market capitalization of $49.93 billion certainly qualifies, the stock is part of the Nasdaq 100 index. That index is tracked by the Invesco QQQ Trust NASDAQ: QQQ, which has advanced 15.28% in the past month.


Industry Peers Also Higher

There was no company-specific news about Palo Alto, but it’s not unusual to see similar stocks within an industry behave in the same way. After Fortinet’s rosy guidance, the industry, as a whole, gapped up at the open on February 8. 

That can happen when the industry’s largest stocks, Fortinet, Palo Alto Networks, and Crowdstrike Holdings Inc. NASDAQ: CRWD all gap higher. 

Crowdstrike was up 1.83% in heavier-than-average volume mid-session.

While it’s easy to lump all of “tech” together as a beaten-down sector, that assumption appears to be outdated. Tech companies as a whole were especially disappointing in 2022, after sector performance more than doubled in the past five years, and rewarded investors with sky-high returns during the pandemic. 

As many newer techs opt for sales growth over profitability, higher interest rates take a toll. When companies issue debt to finance projects, higher rates make it more difficult to service the debt, taking a bigger chunk out of operating revenue. 

Compounding the problem for the sector as a whole, a higher U.S. dollar, relative to other currencies, means prices are effectively rising for international customers. That puts a damper on growth. 

Demand For Cybersecurity

However, Fortinet’s guidance made clear: Cybersecurity is a corner of the tech world that is seeing high demand amid growing concerns about network breaches.  

Even with the post-earnings price action, Fortinet is still attempting to claw its way out of a consolidation that began in January 2022. 

It’s clear that the overall tech sector is beginning to climb out of a hole, as you can see on a chart for the Technology Select Sector SPDR Fund NYSEARCA: XLK

It will take some time for the broad sector to rally. Its largest component, Apple Inc. NASDAQ: AAPL was tech’s biggest decliner, in terms of market capitalization, in 2022. Because of its heavy weighting not only within the tech sector but within the S&P 500, its performance will continue to affect the sector as it, too, attempts to claw its way higher. 

Earnings reports are frequently the catalyst for a stock, or as we’ve seen with cybersecurity names, an entire industry, to notch a big move in either direction. 

Palo Alto Networks is slated to report its fourth-quarter results on February 21, after the closing bell, with Well Street eyeing earnings of $0.78 a share on revenue of $1.65 billion. MarketBeat earnings data for the company show that it topped net income and sales views in the past two quarters.

CrowdStrike next reports on March 7, after the close. Analysts expect a loss of $0.16 a share on sales of $625.10 million. MarketBeat analyst data for CrowdStrike indicate bullishness: Analysts have a “moderate buy” rating on the stock, with a price target of $182.47, representing an upside of 56.90%. 

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Fortinet (FTNT)
4.2889 of 5 stars
$66.45-2.6%N/A45.83Hold$72.35
Palo Alto Networks (PANW)
4.8783 of 5 stars
$279.07-1.7%N/A43.60Moderate Buy$314.82
CrowdStrike (CRWD)
4.678 of 5 stars
$309.05-2.8%N/A858.50Moderate Buy$373.29
Invesco QQQ (QQQ)N/A$438.27-1.6%0.55%N/AN/AN/A
Technology Select Sector SPDR Fund (XLK)N/A$205.42-1.6%0.63%20.04HoldN/A
Apple (AAPL)
4.8735 of 5 stars
$176.55+0.9%0.54%27.50Moderate Buy$204.08
SolarEdge Technologies (SEDG)
4.3648 of 5 stars
$65.35-7.0%N/A145.22Hold$99.84
First Solar (FSLR)
4.9239 of 5 stars
$182.48-1.1%N/A23.58Moderate Buy$227.96
CDW (CDW)
3.7802 of 5 stars
$242.91-2.1%1.02%29.99Moderate Buy$238.90
Arista Networks (ANET)
4.5298 of 5 stars
$271.22-8.6%N/A41.28Moderate Buy$275.59
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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