Ticker Reports for October 21st
Analysts Predict New Highs for Cybersecurity Stock by Christmas
Shares of Palo Alto Networks (NASDAQ: PANW) have had a stellar year, with shares continuing to build on a 180% rally that started in early 2023. Now just $5 shy of its all-time high from February, excitement is growing for what's next.
With a market cap of $122 billion, the outlook for this California-based cybersecurity leader continues to improve, driven by strong demand for its product offering and its competitive positioning.
As we head into the final few weeks of the year, there are several reasons for investors to be excited about Palo Alto Networks' stock. Let's jump in and take a look.
Palo Alto's Consistent Performance
To start with, there's the company's fundamental performance. Palo Alto Networks has been consistently crushing analyst expectations, and last August's report was no different. As CFO Dipak Golechha summed up at the time, "We successfully balanced profitable growth, as our non-GAAP operating margins increased by more than 300 basis points for the year with strong cash generation, marking one of the best years for Palo Alto Networks."
This kind of optimism and momentum puts pressure, in a good way, on Palo Alto Networks to deliver again in next month's earnings report. Needless to say, the fact that its shares look set to continue rallying into the release bodes well for it.
There's also the broader market backdrop to consider, and it's safe to say it's very much working in Palo Alto Network's favor. The benchmark S&P 500 index is hitting fresh all-time highs, which, in tandem with a dovish-leaning Fed, is helping to fuel a risk-on sentiment across stocks in general.
Bullish Updates for PANW Stock
Beyond the strong fundamental performance, it's worth noting that several analysts are bullish on Palo Alto Network's outlook. This month alone, the teams at KeyCorp, Barclays, Morgan Stanley, and BNP Paribas have all rated the stock a Buy. This builds on a similar stance from Susquehanna in late September.
Much of the optimism centers on Palo Alto's platformization strategy and its strong positioning in the ever-growing demand for cybersecurity solutions. Each update has suggested the stock has more room to run, with KeyCorp's price target aiming particularly high. Considering Palo Alto Network shares closed out last week just under $375, KeyCorp's price target of $435 is pointing to an additional upside of around 16%. Needless to say, were Palo Alto Networks' shares to trend up towards that level in the coming weeks, they'd be at fresh all-time highs.
Potential Concerns: Palo Alto Networks' High P/E Ratio of 52
For those of us considering getting involved, there are a few concerns worth noting. First, Palo Alto Network's price-to-earnings (P/E) ratio stands at 52, which is relatively high compared to broader market averages. A stock's P/E ratio is a popular method of quickly ascertaining how expensive or cheap a stock is to its peers and the wider market.
However, while Palo Alto Network's ratio could be called a little high, it's still much lower than their competitor CrowdStrike Holdings Inc's (NASDAQ: CRWD) P/E ratio of 453.
Getting Involved: Palo Alto Networks' RSI Signals Strong Demand
The stock's Relative Strength Index (RSI) reading of 66 is also worth noting. While a little warm, it signals strong underlying demand while falling short of the overbought level of 70. In fact, it has a long history of being around this level, if not a bit higher, while the stock is still logging consistent gains.
There's just under a month to go until Palo Alto Networks' next earnings report, and all signs point to the rally continuing to gather pace in the meantime. The company has shown it can consistently beat analyst expectations, it has received some lofty price targets in recent weeks, and the technical indicators are, for now at least, also supporting the bull's case.
Investors should look for the stock to hit a new all-time high in the coming weeks, with little resistance ahead of it until it's well above $400.
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Nuclear Power Reaches Critical Mass: Top Stocks to Watch Now
Amazon’s (NASDAQ: AMZN) $500 million investment in nuclear power is a sign that nuclear power has reached a critical mass. Not the company’s first investment in nuclear and not the first investment by a major tech company, the news shows how important nuclear is for AI and the evolution of technology. Amazon, Google (NASDAQ: GOOGL), and Microsoft (NASDAQ: MSFT) are all investing in nuclear energy, and others will likely follow suit because advancements in nuclear energy technology are a win-win for the industry. Nuclear energy can provide sufficient power to offset the growing data center need, is scalable, reduces greenhouse gas emissions, is cost-efficient, and supports the national grid.
The best way to play the technology market today is to sit back and watch because the run-up in share prices sparked by Amazon is a front-running reality. Advanced nuclear technology is progressing, and investment cash is flowing into the industry, but it is still a long way from making profits, let alone revenue.
Companies like Oklo Inc (NYSE: OKLO) and NuScale Power Corporation (NYSE: SMR) are good investments but highly speculative, and their share prices will likely retreat to more stable support levels soon. Investors should wait until the hype cools off and more attractive price points are available. The better investment is in uranium mining and refining because companies like Cameco (NYSE: CCJ) are making money today.
Oklo Inc.: Fast Reactor Technology on Track for Operation in 2027
Oklo Inc. focuses on fast reactor technology. Fast reactors don’t slow down the neutrons like traditional reactors and can operate more efficiently, exponentially extending the time between refueling. It is the most advanced fast reactor company, progressing steadily toward U.S. Energy Department certification. It has site-specific approval for a project in Idaho slated for operations to begin in 2027. Its major partners include Apple (NASDAQ: AAPL), Tesla (NASDAQ: TSLA), SpaceX, Netflix (NASDAQ: NFLX), Google, Boeing (NYSE: BA), and OpenAI’s Sam Altman.
Size is among the advantages for business and industry. Oklo’s smallest reactor is 15 MW and comes in 50— and 100-megawatt modules. Reactors can be linked to scale up to project requirements ranging from data centers to site-specific industrial needs and public utilities. Another advantage is safety. Oklo’s fast reactors don’t require water, recycle spent fuel to extend operational time, and are self-stabilizing.
The company is well-capitalized and able to sustain operations for the foreseeable future. At the end of Q2, cash was nearly $300 million, with no long-term debt and a total liability of less than $30 million. However, costs will ramp higher as construction begins, so there is a risk of dilution. Analysts rate it as a Hold and view it as 50% overvalued, trading near $19. Short interest is relatively high and likely to remain high for the foreseeable future.
NuScale Small Modular Reactors Receive Federal Approval
NuScale Power Corporation manufactures and markets the NuScale Power Module and VOYGR scaling platform. It is the first small modular reactor design to receive U.S. federal approval and is on track to launch its first projects by the decade's end. The latest news is a partnership with Standard Power that includes two SMR facilities. The facilities will be colocated with Standard Power’s state-of-the-art data centers, which service the cryptocurrency and AI industries.
Analysts rate this stock as a Moderate Buy but view it as nearly 50% overvalued at $18.50. Short interest is another concern. The 26% short interest is a factor in the stock price run-up because of short-covering; investors should expect the shorts to reposition at higher levels and pressure the stock price until revenue and profitability are in sight. NuScale corporate partners include Fluor Corporation and Xcel Energy.
Cameco Is a Good Investment Today
Cameco is the best investment today, producing revenue and positive cash flow and able to pay dividends. The company operates in three segments that make it a perfect play on today’s nuclear power generation industry and its evolution, including mining uranium, refining fuel and making fuel rods, and parts and services for reactors. The highlights from Q2 include debt reduction and improving cost metrics, compounded by improved guidance. Analysts rate this stock as a Buy and view it as undervalued, trading more than 10% below the consensus with shares near $55. The positive revision trend leads to the high-end range, good for another 2000 basis point share price increase. Short interest in this stock is less than 5%.
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2 Energy Stocks Surging on Billion-Dollar DOE Loan Commitments
The United States Department of Energy (DOE) loan programs office (LPO) provides loans and loan guarantees to support the development and deployment of innovative clean energy projects. A DOE LPO loan directly lends money to the company for eligible projects. Whereas a loan guarantee assures the private lender, like a bank, that the DOE will cover a majority portion of the private loan should the recipient fail to make good on the repayment. The DOE plays the role of lender or guarantor under these programs, which fall under Title 17 Innovate Clean Energy Loan Guarantee Program.
The DOE LPO recently awarded two conditional commitments for billion-dollar loan guarantees for two companies in order to finance their projects to produce sustainable aviation fuel (SAF). SAF can be added to jet fuel to reduce carbon emissions (CO2), just like how ethanol is added to gasoline to reduce CO2 emissions. However, SAF can also be used as a drop-in fuel, meaning that it can be used as jet fuel to power aircraft. The news initially sent the stocks of these two companies in the oils/energy sector surging higher. Let’s examine each deal.
Calumet: Evolving Into the Leading SAF Producer in North America
Calumet Inc. (NASDAQ: CLMT) produces refined fuels, specialty hydrocarbon products, and renewable fuels. The company owns and operates various oil refineries that are flexible enough to be configured for a variety of fuels and products. Its Specialty Products division makes various lubricant oils, solvents, waxes, and petrolatum (petroleum jelly) used in personal care products, cosmetics, pharmaceuticals, and coatings. These are byproducts made from petroleum refining. Calumet also produces fuels, including gasoline, diesel, and jet fuel. Its Montana Renewables subsidiary processes renewable and sustainable fuels and is the largest producer of SAF in North America.
Montana Renewables Receives $1.44 Billion DOE Conditional Commitment
Calumet’s Montana Renewables LLC (MRL) subsidiary was awarded a conditional commitment for a loan guarantee of up to $1.4 billion from the DOE to help finance constructing and expanding its renewable fuels facility. The expansion would boost production capacity to nearly 300 million gallons of SAF and 330 million gallons of combined renewable diesel and SAF. The SAF is sold to U.S. airlines, helping to lower CO2 emissions materially. MRL's SAF is a combination of synthetic paraffinic (SPK) and conventional jet fuel, meeting ASTM D&566 and ASTM D1655 specifications. It's a drop-in compatible fuel for existing aviation fueling technology and infrastructure.
MRL will finance several projects with the loan, which include constructing a second renewable fuels reactor, which will enable 150 million gallons of SAF capability to be online by 2026. It will also install SAF blending and logistics, debottleneck existing renewable fuels and feedstock pretreatment units, boost renewable hydrogen production, and provide a number of site enhancements. The added capacity could result in an additional EBITDA of $200 million, which is the bottom line. The interest payments start once SAF production begins.
Montana Renewables CEO Bruce Fleming commented on its planned MaxSAF expansion project: “The expansion will directly replace fossil jet and diesel, reduce MRL's carbon footprint by producing more renewable hydrogen and electricity, and contribute to regional economic development."
Gevo: A Speculative SAF Player Inches Closer to Production and Credibility
Gevo Inc. (NASDAQ: GEVO) has been a volatile, low-priced stock for years, with the aspiration of becoming a revenue-generating advanced biofuel producer. Gevo’s stock surged up to $15.57 during the post-pandemic reopening in 2021 but has since fallen to a low of 48 cents by Aug. 5, 2024. It's been a regular favorite of momentum traders but has also left a lot of bagholders in its trail. Gevo has been a developmental company for years. It produces revenue from its renewable natural gas (RBG) business, which generated $4.3 million in the second quarter of 2024 but posted a loss of $24 million from operations.
Acquiring an Ethanol Production Plant
On Sept. 12, 2024, Gevo announced the acquisition of the ethanol production plant and carbon capture and sequestration (CCS) assets of Red Trail Energy LLC for $210 million in cash and expected to close in Q1 2025. The acquisition is supposed to make Gevo’s adjusted EBITDA positive in 2025. This started the surge in its stock from 69 cents up to $3.13, further propelled by the prospects of getting closer to its Net-Zero 1 initiative for the production of net-zero greenhouse gas (GHG) emissions SAF. The company is building a production facility in Lake Preston, South Dakota, projected to be operational in 2025.
Gevo Receives $1.46 Billion DOE Conditional Commitment
On Oct. 16, 2024, Gevo announced it had received a conditional commitment for a loan guarantee with disbursements of up to $1.46 billion for the DOE LPO for its Net-Zero 1 (NZ1) project in Lake Preston, South Dakota. The plant is projected to produce 60 million gallons of SAF annually. It will also produce 1.3 billion pounds of animal feed products and 30 million pounds of corn oil annually.
Gevo CEO Dr. Patrick Gruber commented, “This marks a watershed moment for the Net-Zero 1 project and a critical step forward in Gevo’s mission to transform the aviation industry by providing a scalable, sustainable, and economical renewable-carbon-based jet fuel—SAF.”
Gruber concluded, “This valuable commitment to help finance NZ1 if finalized, should also attract other capital investments to unlock SAF commercialization given the robust due diligence conducted by the agency. The due diligence work by the DOE has been incredibly detailed and thorough, and the benefit is a substantially reduced execution risk profile for the project.”
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