We recently published a list of Billionaire Stanley Druckenmiller is Buying and Selling These 10 AI Stocks. Since Palo Alto Networks Inc (NASDAQ:PANW) ranks 7th on the list, it deserves a deeper look.
Stanley Druckenmiller is one of the few billionaires who have been bullish on the AI megatrends right from the start. But that doesn’t mean he’d buy just anything AI the market is buying. After making huge profits from his bullish bet on Jensen Huang’s AI chips empire, he started cashing out of the company in the first quarter and by the end of the June quarter, his stake in the company was left at just over 200,000 shares.
Back in May, Druckenmiller explained why he’s selling the hottest AI stock, saying he’s had a “hell of a run” and he now “just needs a break.”
However, the billionaire said at the time that AI remains underhyped in the long term. Stanley Druckenmiller compared the internet revolution with the current AI boom, saying AI could “rhythm” with the internet and the real payoffs will come 4-5 years from now on. The Duquesne Capital founder, who closed his fund for outside investors and turned it into a family officer in 2011, said that the “incremental payoff” of AI investments is coming by the “day.”
During the second quarter, Druckenmiller shook up his portfolio to buy and sell several famous as well as under-the-radar AI stocks. In this article, we will take a look at some of those.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Stanley Druckenmiller of Duquesne Capital
Palo Alto Networks Inc (NASDAQ:PANW)
Billionaire Stanley Druckenmiller’s Stake Value: $30,161,000 (-36% from the First Quarter)
Strong demand in the cybersecurity industry is boosting Palo Alto Networks Inc (NASDAQ:PANW). Recently, Baird analysts Shrenik Kothari and Zachary Schneider said customers are focused on ROI and increased spending in the industry is benefitting Palo Alto Networks Inc (NASDAQ:PANW).
“PANW has seen this focus on ROI for some time now. Discounts are offered for larger deals rather than smaller ones to help lock in customers and maximize lifetime value. While still early days, initial customer response to new SASE 3.0 capabilities and AI features has been positive,” the analysts said.
They maintained an Outperform rating on the stock and upped their price target to $360 from $340.
DA Davidson also started covering the stock with a Buy rating and added it to its ‘Best of Breed Bison’ category of stocks.
DA Davidson’s Rudy Kessinger thinks Palo Alto Networks Inc’s (NASDAQ:PANW) three platforms will result in vendor consolidation which would be better than other companies. They believe Palo Alto Networks Inc (NASDAQ:PANW) has so far captured only 7% of the market which could reach a whopping $200 billion.
Palo Alto Networks Inc’s (NASDAQ:PANW) biggest strength is its Prisma Secure Access Service Edge (SASE) product, which generated about 50% growth in the fiscal third quarter year over year. Another growth catalyst for Palo Alto Networks Inc (NASDAQ:PANW) is Thunderdome Defense Information System Agency’s zero-trust network architecture.
ClearBridge Large Cap Growth Strategy stated the following regarding Palo Alto Networks, Inc. (NASDAQ:PANW) in its first quarter 2024 investor letter:
“Given our view that the overall market looks expensive, mostly due to mega cap valuations, the low likelihood that technology can continue to deliver well above market returns and an expected slowdown in economic growth, risk management has guided our recent positioning activity. We have been consistently trimming from the select bucket and redeploying into undervalued stable and cyclical names, while also being cognizant of position sizing to maintain the latitude to add to names when prices become attractive.
During the first quarter, we continued to trim IT stocks into strength to manage risk while also adding to high-conviction positions. For example, we trimmed our active weight in Palo Alto Networks, Inc. (NASDAQ:PANW) after the information security software maker lowered its guidance in part due to a new emphasis on providing short-term discounts on product bundles to pursue its consolidation opportunity more aggressively. While this strategy should position the company more strongly in the future, it potentially increases volatility in operating results in the near-to-medium term.”
Overall, Palo Alto Networks Inc (NASDAQ:PANW) ranks 7th on Insider Monkey’s list titled Billionaire Stanley Druckenmiller is Buying and Selling These 10 AI Stocks. While we acknowledge the potential of Palo Alto Networks Inc (NASDAQ:PANW), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PANW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.
