What Happened:
Shares of cybersecurity provider Palo Alto Networks (NASDAQ:PANW) fell 7.25% in the afternoon session after competitor, Microsoft, introduced new products that could challenge its network and cloud security offerings. The products, called Microsoft Entra Internet Access and Microsoft Entra Private Access, are still in testing and have no pricing details yet. However, analysts said they could boost Microsoft's security business. Hamza Fodderwala of Morgan Stanley added that "This is potentially the largest and last major cybersecurity market that Microsoft has yet to enter and it is now competing with cloud network security providers, mainly ZS, NET, PANW." Although the details of the products are still murky, what is clear is that Microsoft has a massive install base of Office, Azure, server, and Dynamics customers into which they can easily cross-sell new products and take share from incumbents.
What is the market telling us:
Palo Alto Networks's shares are not very volatile than the market average and over the last year have had only 13 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was about one month ago, when the stock gained 5.33% on the news that the company would be added to the S&P 500 index. Specifically, Dish Network, a satellite TV provider, would be replaced by Palo Alto Networks. The inclusion of Palo Alto Networks in the S&P 500 is part of the regular quarterly adjustments by S&P Dow Jones Indices to ensure that the indexes accurately reflect the market landscape.
Palo Alto Networks is up 68.1% since the beginning of the year, but at $232.71 per share it is still trading 9.76% below its 52-week high of $257.88 from July 2023. Investors who bought $1,000 worth of Palo Alto Networks's shares 5 years ago would now be looking at an investment worth $3,200.
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