Despite today's 1.3% jump to $253.17, Palo Alto Networks may soon be running into resistance as it is now within range of its average analyst target price of $251.74. With an average rating of buy, and analysts assigning target prices from 180.0 to 307.0 dollars per share, investors will be asking themselves if the Data Processing Services stock can sustain this bullish run.
For the greater market's outlook on the stock, we can use Palo Alto Networks's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 6.7% which means the outlook is split.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Palo Alto Networks, institutional investors own 88.4% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in PANW, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
In conclusion, we see positive market sentiment regarding Palo Alto Networks because of an analyst consensus of little upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about PANW:
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The stock has trailing 12 month earnings per share (EPS) of $0.66
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Palo Alto Networks has a trailing 12 month Price to Earnings (P/E) ratio of 383.6 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 62.77 in contrast to the S&P 500's average ratio of 2.95
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Palo Alto Networks is a Technology company, and the sector average P/E and P/B ratios are 27.16 and 6.23 respectively
