2 Red Hot Tech Stocks Primed for More Gains

By Anthony Bauer,
Head of Private Equity at Hennessy and Associates

 

 

On the whole, many companies have been largely successful in navigating through the current challenging operating environment of rising interest rates, high inflation, and an ever-increasing slowing economy. Basically, 4th Quarter earnings season wasn’t as bad as everybody thought it would be, and with nearly 85% of S&P 500 companies having reported already, around 68% of those companies beat analyst expectations for the quarter.

Palo Alto Networks and Arista Networks are the two companies that I would urge you all to take a look at after their latest blowout quarterly earnings reports, since both tech leaders still have plenty of room to grow their respective businesses, giving them a bright long-term future ahead.

Palo Alto Networks

Palo Alto Networks has a market cap of $57 billion, and is widely considered to be one of the leading names in the cybersecurity software industry, serving over 70,000 organizations in 150 countries, including 85 of the Fortune 100, with its core product consisting of a platform that includes advanced firewalls and intrusion prevention systems which offer network security, cloud security, and endpoint protection. Its shares price has come back to previous levels in the early part of 2023, following last year’s steep selloff, and gained 34.2% year-to-date.

The company has performed well regardless of the current macroeconomic backdrop and reported profit and sales which crushed expectations for its fiscal 2nd Quarter, largely thanks to soaring demand for its various cloud-delivered security services, and it also provided an upbeat outlook, lifting its annual guidance for operating profit, revenue, billings, and free cash flow margins.

Arista Networks

Arista Networks, which designs, produces and sells routers and other networking equipment to cloud providers and large data centers, with a market cap of $41.9 billion, is a great tech stock to currently own, since enterprises are spending more and more on cloud migration despite the uncertain macro setting, and this company is well placed to achieve ongoing future profit and increasing sales growth as the economy continues to shift into digitization.

The company has been successful in grabbing market share from chief rivals Cisco Systems and Juniper Networks in recent years, which is a testament to the strong execution and intelligent management across a company which can count Microsoft and Meta Platforms as its two largest customers, and which reported 4th Quarter earnings and revenue that easily beat analysts’ estimates, boosted largely by strong demand for its cloud computing network gear from large companies, government agencies and educational institutions.

Disclosure: The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.