The Q1 reporting season brought mixed results from tech stocks for Q4. The ultimate takeaway is that digitization continues, cloud growth accelerates, and AI drives a robust outlook. The problem was that greed led analysts and markets to overrun reality and price in every bit of possible growth before the market could mature.
The result is that many markets were reset. The reset returned many tech stock prices to reasonable ranges and opened up attractive buying opportunities. Opportunities to position for the 2nd half of this year and 2025. This is a look at five of the most promising.
Palo Alto Networks Invests In the Future
Palo Alto Networks (NASDAQ: PANW) is the largest and leading cybersecurity firm on the market, and it is investing in the future. The FQ2/CQ4 results highlighted a shift in the focus that led to its stock price implosion. The shift includes offering numerous free or reduced services to attract new clients and cement its position as the market leader.
The near-term takeaway is that revenue, margin, and earnings will be impacted, while the long-term is that growth will be sustained and margins widened due to the platformization of services, an increased client base, and deepening penetration of services in an increasingly dangerous cyber world.
There was some negative analyst activity following Palo Alto’s announcement, but not enough to alter the community outlook. The consensus sentiment held firm at Moderate Buy while the price target increased. The consensus target is up in the twelve-, three-, and one-month comparisons and now 12% above the action, in a position to lead the stock price higher.
ZScaler Follows Palo Alto Networks Into the Buy Zone
Zscaler’s (NASDAQ: ZS) stock price began to move lower in tandem with PANW and accelerated after the release of Q4 results. The strong results included improved guidance, but the analysts and market secretly hoped for more. The result is that shares are down about 25% from their highs and trading at a critical support target at the midpoint of a trading range.
Because analysts remain bullish on the stock and the post-release revisions are net-positive, with the consensus target rising and 20% above the current action, support should hold at this level. Zscaler’s next report is due in late May. The thirty-three analysts covering it have all revised their targets upward but may still underestimate the company, expecting growth to slow to 28%.
MongoDB Positioned for Long-Term Growth of Cloud and AI
MongoDB’s (NASDAQ: MDB) price action fell due to its guidance, which fell short of the consensus. However, guidance remains solid and expects double-digit growth that may underestimate business strength in 2024. Regardless, the company is well-positioned to compete in the rapidly growing cloud industry and is a leader in AI-powered services and services for AI businesses.
Analysts weren’t enthused by the news and issued mixed reviews, but the net result was positive for investors. A downgrade to Sell was offset by an upgrade to Outperform and several price target increases, with consensus up compared to last month, last quarter, and last year, nearly 100% higher than the previous year.
UiPath Is On Track to Complete a Reversal
UiPath (NYSE: PATH) shares are edging lower following its report, but the move is tepid and aligns with the budding uptrend. Assuming the market sustains support at the current levels, it should rebound soon. In this scenario, the market would confirm a reversal that began last year and set itself up to sustain a rally this year and next. The analysts were impressed with the results and guidance and issued more than a dozen positive revisions advancing the range's low-end, mid-point, and high-end. The low end of the analysts' range assumes a low-single-digit upside, while consensus is closer to 22%.
Snowflake Falls Back to Earth
Snowflake’s (NYSE: SNOW) share price fell more than 30%, aided by Palo Alto’s implosion, weaker-than-expected guidance, and an unexpected CEO change. The most worrisome news is that CEO Frank Slootman is retiring. However, he will remain board chairman, and incoming CEO Sridhar Ramaswamy has ample experience. He came to the company in 2023 with the acquisition of Neeva and was the head of Snowflakes AI division. Analysts' revisions were slow to start, but the pace is picking up with numerous price targets and rating upgrades to offset fewer negative actions. Analysts rate this stock at Moderate Buy and see it advancing 25% at the consensus midpoint.
