Wall Street Seems Skeptical Of Palo Alto's Transition

Past success may buy you a little benefit of the doubt on Wall Street, but only just a little. While it’s hard to quibble with Palo Alto Networks’ (PANW) track record as a disruptor and growth story in the security space, that hasn’t helped the shares so much in recent months. While security spending looks pretty healthy going into 2019 and the death of the firewall (due in part to transitions toward cloud/hybrid-cloud approaches) has been greatly exaggerated, Wall Street does seem uncertain about the company’s pivot toward more cloud-oriented solutions and a new executive leadership team whose career experience in the security space isn’t as deep.

I don’t dismiss those industry experience concerns out of hand, but I think Palo Alto has brought on some talented executives that can help Palo Alto stay nimble and evolve – doing what worked in the past as your end-markets change is a pretty good way to get left behind in technology. Palo Alto looks cheap enough now that I’m a little paranoid and wondering what I may be missing; I get that the market has soured on tech stocks and that 2019 could be a more challenging year than 2018 was, but the shares seem to be discounting a pretty weak scenario today.

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Wall Street Seems Skeptical Of Palo Alto's Transition

Seeking Alpha: NetApp's Best Hope Is Probably Its Wallet

Given the operating struggles that are increasingly evident with each quarter, NetApp (NASDAQ:NTAP) may be best served by thinking along the lines of, "if you can't beat 'em, buy 'em". As is, I think NetApp has painted itself into a corner such that if it doesn't do something significant via M&A, the company is probably done as a real force in storage. Nimble (NYSE:NMBL) and Tintri are chewing on the company, and while Nutanix seems to talk and think more about EMC (NYSE:EMC) and VMware (NYSE:VMW), I can't see how the company's position in hybrid cloud today is encouraging for NetApp.

NetApp longs are not going to like this (and yes, I own EMC shares), but I don't see a very bright future for ONTAP, and I think the company's relative strength in the mid-range market is going to mean less and less with what's happening in hyper-converged infrastructure and hybrid clouds. While NetApp may have more value than the market credits today on the basis of a legacy business (external arrays aren't going to vanish tomorrow), the product revenue growth that the Street generally requires as a prerequisite for bullishness is going to be tough to create. With that, NetApp's best asset may be its nearly $4 billion in net cash and the opportunity to acquire a business like Nimble, Tintri, Tegile, or Nutanix and reinvigorate its positioning relative to where storage seems to be heading.

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NetApp's Best Hope Is Probably Its Wallet

Seeking Alpha: Check Point Software Offers A Good Risk-Reward Trade-Off

After a tough couple of years in which analysts and investors questioned whether Check Point Software Technologies (CHKP) could maintain its market share against more aggressive up-and-comers like Palo Alto Networks (PANW) and Fortinet (FTNT) and whether the company's prioritization of margin over share was the right strategy, 2013 was a good year for the shares. That momentum has been holding up of late, as although Check Point didn't have a great first quarter, the company has avoided a lot of the negativity that has hit Fortinet, Palo Alto, and FireEye (FEYE) recently.

As a stock, Check Point is a much different proposition than Palo Alto, FireEye, or Fortinet. This company isn't disrupting the market and isn't likely going to be growing revenue at a frequent annual double-digit rate. On the other hand, it has strong market share and a good margin and free cash flow base. I don't see the same overall upside to Check Point as its smaller rivals, but on a risk-adjusted basis, the return is still good enough to make this a worthwhile stock for less risk-tolerant investors.

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Check Point Software Offers A Good Risk-Reward Trade-Off

Seeking Alpha: As Palo Alto Networks Disrupts The Market, More Gains Can Come

Next-gen security company Palo Alto Networks (PANW) certainly does not look all that cheap on backward-looking metrics like price/sales, but the company's share gain prospects and well above-average growth could lead to more price appreciation from here. Palo Alto already generates pretty solid free cash flow margins with less than 15% market share, and as the company looks to turn up the pressure on Cisco (CSCO) and Check Point (CHKP), margin leverage could move higher.

Certainly, there a lot of words like "could" and "potential" when it comes to Palo Alto. The company has built itself into a low-teens market share holder in the network security space, but Cisco, Check Point, Fortinet (FTNT) and the rest are not going to roll over. Likewise, there are ongoing concerns about the company's litigation with Juniper (JNPR), the direction of future network security threats and solutions, and the fundamental long-term profitability of the business. Expectations for Palo Alto are demanding, and the risk is above-average, but this still shapes up as a hybrid hardware/software company worth a closer look.

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As Palo Alto Networks Disrupts The Market, More Gains Can Come

Seeking Alpha: Palo Alto Networks Trying To Win Back Wall Street's Love

It's so common as to be practically cliché - a young tech company with disruptive technology comes out as a hot stock, gets sell-side analysts racing to put out ever-higher targets, stumbles, and then has to spend some time in the penalty box before it wins back institutional investor love. We can argue about the extent to which Palo Alto Networks (PANW) has followed exactly that pattern, but I think the relative performance of "new security" firms like Palo Alto and Fortinet (FTNT) is pretty striking relative to "old security" firms like Check Point Software (CHKP).

I've long been a die-hard supporter of Check Point Software, but I'm actually wondering whether Palo Alto may be the better buy for the time being. True, the company does have to deal with litigation brought against it by Juniper (JNPR), and that may lead some investors to step aside pending a resolution. Likewise, the recovery in IT spending that seems to be emerging could go away with little warning. Even so, I think Palo Alto has a meaningfully better mousetrap in enterprise security and I think the shares may be undervalued to a worthwhile extent today.

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Palo Alto Networks Trying To Win Back Wall Street's Love

Seeking Alpha: Cyan Looks To Bring The Green

Talking about increasing carrier network traffic may border on the cliché at this point, but it's a real problem for network operators. If Cisco's (CSCO) prior estimates of compound annual traffic growth of 23% between 2012 and 2017 are even close to accurate, carriers badly need new strategies for coping with traffic growth, as boosting capex by 23% a year for five years isn't much of an option.

This is where Cyan (CYNI) comes into the picture. Cyan is unproven (less than $100 million in revenue), but the company has two separate approaches to help carriers meet their network needs - packet-optical transport systems that can help manage traffic at the metro edge and reduce the need for expensive routers, and a purpose-built SDN solution for carriers that offers the promise of more efficient network utilization.

Cyan is going up against numerous well-established equipment vendors and alternative approaches to managing network traffic. What's more, I have some concerns that the company's position in carrier SDN isn't as unique as hoped. Even so, I believe there is an argument to be made that Cyan shares are trading meaningfully below fair value. While this is a company/stock with above-average risks, a fair value in the range of $12.00 seems reasonable and that range could expand well into the high teens.

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Cyan Looks To Bring The Green

Investopedia: The Market's Panic On Cisco Seems Overdone

Over time you eventually get used to the idea that the market seldom looks past one or two quarters (except, of course, when it's convenient to do so). So insofar as that goes, I can see how some investors may have listened to the Cisco (Nasdaq:CSCO) conference call, thought they heard a sniffle or two, and rushed to hit the panic button. Though I'm not going to say that Cisco is fully out of the woods and everything is wonderful again in IT-land, I think the long-term valuation on Cisco is getting pretty interesting now.

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http://www.investopedia.com/stock-analysis/081513/markets-panic-cisco-seems-overdone-csco-jnpr-hpq-ibm.aspx

Investopedia: If Alcatel Can Keep This Up, The Turnaround Can Work

These are still very early days, but if the second quarter is any sign, Alcatel-Lucent's (NYSE:ALU) latest restructuring efforts may bring this company (and stock) back into relevancy. There is still plenty than can go wrong, but the carrier spending environment is looking better by the month, and will likely put some significant tailwinds into Alcatel's sales. While I definitely missed out on the early jump in these shares, a pathway to $3.50 (or higher) for the shares is at least worth talking about today.

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Investopedia: Could Alcatel-Lucent's Restructuring Boost Ericsson Further?

At the risk of sounding like I'm looking to bash Alcatel-Lucent (NYSE:ALU), I have been thinking more about the company's recently-announced restructuring efforts and wondering if they will help the company as much as they may help the company's rivals. The “law of unintended consequences” is real, and though there are sound motives for the company's moves, it nevertheless could backfire. To that end, I have to wonder if Ericsson (Nasdaq:ERIC) and Huawei are poised to reap the most benefit from Alcatel's self-improvement plans.

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http://www.investopedia.com/stock-analysis/062113/could-alcatellucents-restructuring-boost-ericsson-further-alu-eric-jnpr-cien.aspx

Investopedia: Will A New Alcatel-Lucent Plan Lead To Better Results?

Stop me if you've heard this before – Alcatel-Lucent (NYSE: ALU) has a bold plan to cut costs, refocus the business, and return the company to profits and prosperity. To be fair, the new CEO does deserve a chance to show if his plan can/will work, and the broad strokes outlined today make sense. Even so, this is Alcatel-Lucent and the telecom equipment industry we're talking about, and success is far from guaranteed.

Cut Costs, Cut Businesses
 The centerpieces to the new plan are deep cost cuts and a sharp focus on businesses where Alcatel-Lucent can compete effectively in the coming years.

While the company had been targeting about EUR 500 million in cost cuts by 2015, that target has been doubled. Management intends to achieve this by increasing its direct channel focus with sales and marketing and reducing the scope of its R&D. That's an interesting move, particularly given how many Alcatel-Lucent bulls try to point to the company's patent estate as a store of future value. While it makes ample sense to reduce the scope of R&D (translating those patents into real products and real revenue streams has not gone well), I wonder how it will go over with shareholders.

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Investopedia: Riverbed Technology Waiting On Synergies And Performance Management Market

Companies deal with fading growth prospects in different ways. Some companies, like F5 (Nasdaq:FFIV) try to use relatively small-scale M&A and their own internal R&D to develop new products and enter into new markets. Others, like Cisco (Nasdaq:CSCO) and Riverbed (Nasdaq:RVBD) take bigger swings on the M&A front, putting more of their shareholders' capital at risk in the hopes of bigger long-term rewards. While the growth prospects for WAN optimization are no longer as bright as they once were, Riverbed hopes to benefit from a more comprehensive suite of technologies and solutions for the network performance market, and the stock may just be cheap enough to be worth consideration.

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Investopedia: Brocade's Uncertain New Direction

As Brocade (Nasdaq:BRCD) struggles to go anywhere, new management realizes that the company can't simply operate as it always has. But a new direction isn't particularly helpful if it is the wrong one, and I have real doubts about the company doubling-down and looking to compete with Cisco (Nasdaq:CSCO) in markets like data centers. While expectations for Brocade are shockingly low, it's hard to see this stock going anywhere without a real improvement in sales growth.

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Investopedia: Cisco Comes Through, But Times Are Still Tough

With so many negative earnings reports for the first quarter, expectations for Cisco's (Nasdaq:CSCO) quarter were pretty modest. As a good company should, Cisco came through with a solid quarter and signs of share gain in multiple markets. That said, while I do believe Cisco is still undervalued, investors might want to exercise some caution before piling back into tech stocks.

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http://www.investopedia.com/stock-analysis/051613/cisco-comes-through-times-are-still-tough-csco-jnpr-arun-ntap.aspx

Investopedia: After The Hurricane, Is It Safe To Visit Aruba Networks?

There's a pretty good rule of thumb that applies to swimming and diving – if you can't see the bottom, don't dive in -- and think twice about swimming there. Likewise, jumping into a stock right after a significant revision to earnings expectation can be an invitation for successive disappointments, as companies don't often miss just one time.

With Aruba Networks (Nasdaq:ARUN), that leads to some tough choices for investors. While I definitely believe that the wireless networking (WLAN) is going to grow significantly, and that Aruba is well-positioned to take more share in the small/medium-sized business (SMB) space, I also acknowledge that WLAN spending is largely discretionary and this company could see further order/revenue disappointments if IT demand doesn't rebound during the summer.

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http://www.investopedia.com/stock-analysis/050913/after-hurricane-it-safe-visit-aruba-networks-arun-csco-rkus-msi-ffiv-rvbd-orcl-ibm-jnpr-hpq.aspx

Investopedia: Alcatel-Lucent Looking At Long Road, But Not Starting From Scratch

To get a sense of just how badly wrong the Alcatel-Lucent (NYSE:ALU) story has gone, consider that the combined company has never produced a full year of positive free cash flow since the 2006 merger. What's more, while the company still has very relevant share in areas like edge routing, rivals like Ciena (Nasdaq:CIEN), Huawei, and ZTE have been taking share, while companies like Nokia Siemens Networks get their acts together.

That's all pretty well known, though, and part of the reason the stock sits below $1.50 today. With a new CEO, new products, and new market opportunities, perhaps Alcatel-Lucent has new life to offer shareholders.

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Investopedia: Fortinet Stumbles, Making Tech Investors Very Insecure

Although you wouldn't necessarily always know it by the growth rates at leading enterprise security vendors like Check Point (Nasdaq:CHKP) and Cisco (Nasdaq:CSCO), security has been one of the better markets in enterprise IT. So the real question in the wake of Fortinet's (Nasdaq:FTNT) warning on first quarter results is whether this is company-specific, market-specific, or a more widespread problem within the security sector.

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http://www.investopedia.com/stock-analysis/041113/fortinet-stumbles-making-tech-investors-very-insecure-ftnt-chkp-csco-panw.aspx

Investopedia: F5 Networks Takes Another Whirl In The Tech Spin Cycle

Between earnings from the likes of Oracle (Nasdaq:ORCL) and TIBCO (Nasdaq:TIBX) and yesterday's negative guidance from F5 (Nasdaq:FFIV), I think it's safe to say that the tech spending market has cooled noticeably. Given the hype and hope that had been built into so many tech company valuations, that should probably have investors feeling at least a little uncomfortable now. While I am still a believer in F5, it's going to be tough to own tech stocks until there is a real sign of renewed momentum in the sector – likely a second-half event.

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http://www.investopedia.com/stock-analysis/040513/f5-networks-takes-another-whirl-tech-spin-cycle-ffiv-rdwr-csco-orcl.aspx

Seeking Alpha: The Street Doesn't Seem To Believe Radware Will Become A Player

Wall Street doesn't typically have all that much patience with tech growth stories, so while Radware's (RDWR) historical growth is hardly embarrassing, it doesn't seem like analysts or investors expect big things from this company in the future. Maybe that's fair given the slowing ADC market and the rampant competition in security, but Radware's technology and rich cash balance could generate more growth than currently expected.

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The Street Doesn't Seem To Believe Radware Will Become A Player

Seeking Alpha: Sourcefire's Risk-Reward Seems A Little Out Of Whack

Growing tech stocks rarely look cheap by conventional metrics, and Sourcefire (FIRE) has been an all-too-rare beat-and-raise grower even through this slowdown in enterprise IT spending. Relative to the opportunities and valuations at other security players like Cisco (CSCO), Check Point (CHKP), Fortinet (FTNT), and Palo Alto (PANW), though, it's not so clear that Sourcefire is a major bargain at today's prices. Although the potential addressable market would indeed likely support strong revenue growth and the company's technology could make it an acquisition target, I'm not sure Sourcefire should have this sort of relative valuation.

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Sourcefire's Risk-Reward Seems A Little Out Of Whack

Seeking Alpha: Buy Cisco And Take Advantage Of A Change For The Better

Time is never kind to tech companies. Even those that manage to stay on the leading edge of technology and evolve with the times have to face that difficult transition from the "valuations don't matter" high-growth phase to the "how will they ever grow again?" lower growth phase. IBM (IBM) is probably the best example of that transition done right (though Oracle (ORCL) seems to be managing it quite well), while Microsoft (MSFT) and Intel (INTC) are still struggling to reorient themselves.

That brings us to Cisco (CSCO). Plenty of companies, ranging from F5 (FFIV) to Palo Alto (PANW) have looked to build their own fortunes by going straight at Cisco in particular markets and/or positioning themselves for evolving markets like software-defined networking (SDN). While Cisco will indeed never grow again like it used to, the Street's addiction to growth seems to be seriously underpricing Cisco's probable cash flow stream.

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Buy Cisco And Take Advantage Of A Change For The Better