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- No Ad | February 21st, 2024
No Ad | February 21st, 2024
[ good morning ]
Here’s everything you need to know today
After weeks of this rally showing signs of an approaching peak—The Street is bracing for a make-or-break moment tonight.
The NASDAQ is trading with a lot of volatility after Palo Alto Networks ($PANW)—the sure-fire king of cybersecurity—reduced their guidance for 2024 in last night’s Q4 earnings report. Palo Alto Networks has been pretty heavily hyped in the last few months, and as such they became a primary stock that traders bought into the rally a little too hard.
So, all the short-term alpha at Palo Alto Networks evaporated in premarket trading and the stock pulled a sharp correction early today. But PANW’s guidance is still well within ranges to keep us bullish long term. More importantly: this pattern of a company getting a little overbought only to correct thanks to more realistic predictions for 2024 is playing out across the market. Wall Street spent January laying down bets.
But the big show hits after the market closes today with Nvidia teeing up a pivotal Q4 earnings report of their own. Of all the stocks powering this recent buying spree—Nvidia is one of the hottest. If Nvidia keeps finding a way to meet ever-higher expectations, that will keep this rally running hot. However, if Nvidia follows the more average pattern of posting more realistic 2024 predictions that come below The Street’s stratospheric expectations, we’ll potentially see a wave of correction hit the AI sector.
In the long term, this will be a positive moment for the rally. The last thing we want to see is the market devolving into full mania, and more realistic expectations for our recovery sets us up for a longer, much more sustainable rally as the Fed prepares for eventual rate cuts.
Of course, AI could still be the transcendent technology we all think it is and Nvidia can send the NASDAQ soaring ever-higher tonight too. The only true constant in periods of transition like this is volatility. Day traders are in for a bloodbath while folks with a longer-term time horizon are simply going to get hit with a little variance. Either way, gear up for hot takes and hotter price action while The Street decides if this is the top or not.
Let’s focus on the longer-term trends and market mechanics powering this topping process so we can try to stay above the noise.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ cybersecurity ]
Palo Alto Networks Craters on Earnings
Bulls just can’t handle realistic goals.
BREAKING NEWS
After more-than-doubling their market cap in the last year, Palo Alto Networks ($PANW) has come crashing back to earth after their 2024 guidance painted a more realistic growth picture. What’s going on here?
WHAT HAPPENED
This is a classic narrative during periods of transition like this. First up: PANW beat expectations across the board in Q4—generating a strong $1.46 in earnings per share (EPS) from $1.98 billion in revenue.
However, these are only minor beats when the market has become used to Palo Alto Networks smashing The Street’s ever-higher expectations. In order to justify a market cap that’s jumped around $30 billion dollars since October—PANW needs to continue setting a higher and higher bar. Instead, it looks more like The Street has finally properly rated the stock.
REALITY BITES
More importantly—management at Palo Alto Networks took a long, hard look in the mirror this quarter and set lower guidance for both Q1 and 2024 overall. Their new ranges are slightly lower and within a normal range for this kind of adjustment. But, once again—traders have been piling onto PANW stock, and the company needed to keep feeding the mania with ever-higher growth expectations. This reality check is great for Palo Alto Networks, but it hurts short-term speculators who have been buying the stock like growth could somehow turn infinite.
WHY IT MATTERS
We’re really happy to see management teams like Palo Alto Networks establish more realistic goals for the year. PANW management expects a slightly more difficult customer environment as all this AI mania enters a period where clients need to see real value for all these promises. Palo Alto Networks is still fundamentally growing in the right way and locking in the right kind of deals to be successful in the long term. But it just looks like they won’t turn into some globe-spanning cybersecurity empire the way speculators were hoping. Palo Alto Networks stock dropped over 20% in early trading. But, that already looks like an overcorrection from a market that is just too jumpy right now.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -0.15% | 4.81% | 43.88% |
| Consumer Disc. | -0.94% | 1.18% | 19.56% |
| Consumer Stap. | 1.05% | 3.22% | 0.91% |
| Energy | -0.91% | 5.99% | 0.80% |
| Financials | -0.28% | 3.75% | 9.53% |
| Health Care | -0.34% | 3.98% | 10.76% |
| Industrials | -0.31% | 4.27% | 15.06% |
| Materials | -0.21% | 3.95% | 5.08% |
| Real Estate | -0.16% | -1.39% | -2.82% |
| Technology | -1.02% | -0.32% | 45.35% |
| Utilities | -0.07% | 0.38% | -9.99% |
*Market data based on standard trading hours and calculated close to close
[ media ]
FuboTV Sues Disney & Friends Over Joint Sports App
The streaming wars just opened a wild new front
BREAKING NEWS
Disney’s massive transformation may hit a few roadblocks as FuboTV is suing over their new joint sports app. Let’s break down the details:
WHAT HAPPENED
A few weeks back, Disney, Fox, and Warner Brothers announced they were launching a joint venture streaming app that would serve as a single home for sports content. An app like this would crush competitors like FuboTV—so it makes sense that the streaming newcomer is suing on antitrust grounds.
TRUST BUSTING
FuboTV has been struggling to launch mainly due to extremely high bundling fees and exorbitant licensing costs from big sports providers. A joint app like this basically would directly compete with FuboTV and not have any of those costs associated with it. If this sports app actually launches, it could serve as a death blow to FuboTV—giving the streamer a pretty strong argument to kill this joint venture on monopoly grounds.
WHY IT MATTERS
Disney, Fox, and Warner Brothers are struggling to survive on their own in the live sports world as streaming giants with deep pockets are moving into the space. Old media desperately needs a move like this, but FuboTV probably won’t survive long in a world where this new venture exists. This is going to be a brutal fight and it’s tough to see who wins here. For now, every major player in this lawsuit is trading downward this morning as the market only expects this fight to be bloody for all parties.
[ green energy ]
SolarEdge Decline Deepens on Weaker Outlook
The prospects for green energy just get weaker and weaker in a world of higher interest rates
BREAKING NEWS
SolarEdge continued their historic downfall today after the company posted Q1 guidance that didn’t even halfway meet what Wall Street wanted to see. Is clean energy a complete bust?
WHAT HAPPENED
In Q4, SolarEdge admirably controlled costs enough to beat earnings expectations. They generated a much smaller loss—$0.92 per share—from $316 million in revenue. While that revenue number came in well shy of expectations, Solaredge’s outlook is the real reason folks are fleeing the stock in droves.
GETTING DARKER
Analysts were hoping that SolarEdge was getting inventory problems under control enough to generate more revenue in Q1 of this year. So, The Street set a high bar of $416 million in revenue for SolarEdge’s Q1 guidance. However, SolarEdge management predicts that they’ll only be able to generate $216 million in revenue for Q1 at their absolute best. This is really bad.
SolarEdge has watched revenues crumble over the last year. In Q4 of 2022, the company made $890 million in revenue. So, beating expectations in Q4 still represents a 65% revenue decline. Solaredge’s clients simply bought way too much inventory when things were cheaper in 2021 and 2022—and since solar projects are stalling out thanks to higher interest rates, effectively no one is buying from Solaredge until this outlook improves. Solaredge can only control costs and try to stay alive until the macro environment improves.
WHY IT MATTERS
It is incredible that revenue prospects could get any worse for high-flying solar players like SolarEdge. With inflation staying sticky and the market expecting rates to stay higher—stocks like SolarEdge will probably continue to suffer for months to come. SolarEdge shares dropped over 15% in early trading after the company already experienced a decline of over 70% in the last year.
Extra Moby Snacks
Amazon stock got some decent lift this morning after it was announced that the company would be joining the Dow Jones index next week. Walgreens is getting booted from the prestigious listing to make room for the commerce king.
As tensions between the U.S. and China continue to bubble—the Biden Administration is signing an executive order to spend billions of dollars replacing Chinese-built shipping cranes at critical U.S. ports. Ransomware attacks are on the rise, and new risks of a devastating cyberattack on U.S. infrastructure have the government preparing for all kinds of outcomes.
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