Palo Alto Networks Inc (PANW), Check Point Software Technologies Ltd. (CHKP): Notes From the Latest Tech Crash

Where next?

It’s hard to be overly positive because it would have been useful if Palo Alto had reported better conditions in April/May but, the fact is that they did not. With that said the bullish case sees the sequestration effects as causing some short term reactions, much of which will be ironed out later in the year. Sequestration has its most obvious influence on public expenditure, but it will also affect the private sector because the former uses the latter. However, once the fear of the unknown recedes then companies like Palo Alto and Fortinet can hit their revised guidance.

The bearish case argues that these effects will continue to slowdown the IT market as the knock-on effects ripple through the economy and guidance will have to be lowered for many of these companies. Meanwhile the situation in Europe is hardly looking much better with sovereign debt issues remaining at the forefront of concerns.

Since we have never had sequestration before, it is hard to know which approach to take! My gut feeling is that things won’t get much worse. Unemployment is falling in the U.S., and growth is moderate but constant, while the housing market is picking up. F5 Networks has some uncertainty about it and Check Point Software Technologies Ltd. (NASDAQ:CHKP) needs to demonstrate it can get back to product revenue growth. However, if you are going to buy Palo Alto and Fortinet then this could be a decent time to start thinking about picking some of these names up.

Lee Samaha has a position in Fortinet. The Motley Fool recommends Check Point Software Technologies and F5 Networks. The Motley Fool owns shares of Check Point Software Technologies and F5 Networks.

The article Notes From the Latest Tech Crash originally appeared on Fool.com and is written by Lee Samaha.

Lee is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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