Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Palo Alto Networks Inc (PANW) & Fusion-IO, Inc. (FIO): These 2 Companies Could Solve A Major Problem In High-Tech

Page 1 of 2

Of the 11 sectors covered by S&P Capital IQ, only one is on track for lower profits in 2013: technology.

The profit anemia stems from several factors, including:

Extremely low levels of government spending due to the current sequester.
Depressed sales activity in Europe. The tech sector has more exposure to Europe than any other sector.
A lack of any hot new products or trends to trigger interest among buyers.

Yet as we’ve noted many times, several tech firms are sitting on stunning levels of cash. Cisco Systems, Inc. (NASDAQ:CSCO), Microsoft Corporation (Nasdaq:MSFT), Oracle Corporation (NASDAQ:ORCL) and others may have a hard time generating organic growth, but they have a long track record of acquisitions to help get the needle moving.

Though it’s unwise to buy a stock simply because you suspect it is a buyout candidate, you can’t ignore a company’s appeal in a merger and acquisition(M&A) scenario if it has a strong base of technology or an impressive customer list. And you surely need to pay attention if that stock has recently traded sharply lower, creating more compelling valuations for a potential buyer — or simply on a stand-alone basis.

Here are two slumping tech stocks that now hold solid value in light of their considerable growth prospects and market positioning.

Palo Alto Networks

Palo Alto Networks Inc (NYSE:PANW)

Palo Alto Networks Inc (NYSE:PANW) has arguably the most comprehensive suite of network security system capabilities, helping companies and governments operate their servers without malware, spoofing and other gremlins that can cripple a company’s networks. Palo Alto Networks Inc (NYSE:PANW)’s major clients include Splunk Inc (NASDAQ:SPLK), Citrix Systems, Inc. (NASDAQ:CTXS), Aruba Networks, Inc. (NASDAQ:ARUN) and Ericsson (NASDAQ:ERIC).

Those partnerships have helped fuel triple-digit annual sales growth for five straight years, and sales are on track to rise another 50% this year to around $400 million. Still, the “laws of bigness” are starting to kick in and sales growth could slip below 40%. Slowing growth may explain why this stock has suddenly fallen out of favor.

Another explanation for falling shares: Management has decided to sharply boost headcount (from a recent 950 to roughly 1,400 a year from now) to help keep sales growth above 35% for the foreseeable future. That hiring spree is eating into near-term profits.

Right now, Palo Alto Networks Inc (NYSE:PANW) is the fourth-largest network security firm behind Cisco Systems, Inc. (NASDAQ:CSCO), Juniper Networks, Inc. (NYSE:JNPR) and Check Point Software Technologies Ltd. (NASDAQ:CHKP). However, other companies involved in network management — such as Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corp. (NYSE:IBM) and Hewlett-Packard Company (NYSE:HPQ) — have reportedly been eyeing the security niche in recent years, thanks to its robust growth prospects. Palo Alto Networks Inc (NYSE:PANW) would quickly make them one of the leading security vendors in terms of software functionality.

Analysts at JMP Securities “believe Palo Alto leverages significant technology advantages in the next-generation firewall market,” and they see shares rebounding toward a $60 price target.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!