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Palo Alto Networks Q2 Beats Despite Deceleration, Stock Up

Palo Alto Networks ( PANW ) stock rocketed late Thursday after the cybersecurity firm blasted Wall Street’s fiscal Q2 projections and issued Q3 sales guidance that easily topped consensus estimates, though its EPS outlook missed views. For its fiscal Q2 ended Jan. 31, Palo Alto reported 40 cents earnings per share on $334.7 million in sales, up 110.5% and 54%, respectively, from the year-earlier quarter. Both measures, however, decelerated for the second consecutive quarter. Sales beat the consensus estimate of 40 analysts polled by Thomson Reuters for $318.3 million. Palo Alto topped EPS expectations by a penny. Three months ago, Palo Alto guided sales to $314 million to $318 million and EPS ex items to 38-39 cents. Current-quarter sales guidance for $335 million to $339 million topped analyst forecasts for $334.9 million, but Palo Alto’s EPS ex items guide for 41-42 cents missed expectations for 45 cents. Palo Alto’s Q3 sales would be up 44% at the midpoint of guidance, and EPS ex items would rise 80% at the midpoint. But both metrics would also decelerate for the third consecutive quarter. Palo Alto Networks stock was up more than 2% in after-hours trading, after the company released earnings.

Department Store Stocks Rally Hard In ’16: Are They Back From Dead?

Are department store chains sitting ducks in the new retailing jungle of the Amazon.com ( AMZN )? It seems that in 2016 so far, bullish investors would disagree. IBD’s Retail-Department Stores industry group has a trashy rating for six-month relative price performance — at No. 158 out of 197 groups and subgroups as of Thursday’s newspaper — the group is also up more than 10% since Jan. 1. Only four other groups, including Food-Meat and Mining-Gold, can match that performance. What’s more, a positive trend within the Retail sector is emerging; five more retail subgroups — discount & variety, leisure products, apparel and shoes, restaurants and auto parts — show year-to-date gains of 3% or more. The S&P 500 is down 5%. Macy’s ( M ) has the largest market cap in Retail-Department Stores at $13.6 billion. The 37 RS Rating is wretched. Yet the stock is up more than 23% since Jan. 1. Even with the stout gains, Macy’s is still 41% below its 52-week peak of 73.61. Macy’s continues to see slumping sales; in the past four quarters, they fell 1%, 3%, 5% and 5% below year-ago levels. Yet the big box retailer is still profitable; Wall Street sees earnings in fiscal 2017 (ending in January next year) slipping only 3% to $3.80 a share. That’s still sharply above the $1.29 it pocketed in fiscal 2009 amid the Great Recession. Macy’s has mastered the practice of making every week feel like Black Friday. Customers are bombarded with big-discount coupons nearly every week via email, the Sunday paper or by snail mail. It seems to be working. Its one-day Saturday Sale events have brought loyal customers into its cavernous stores. Macy’s strives for innovation; on Feb. 18 it unveiled a new line of men’s clothing with snowboarding and skateboard superstar Shaun White. The collection pledges to reflect White’s “adrenaline-pumping, eclectic style.” Macy’s has driven its annual pretax margin to the 7% to 8% level over the past five years, up from the 3% to 5% range seen from 2008 to 2011. Nordstrom ( JWN ), No. 2 in market cap at $9.6 billion, has rebounded in recent days following its Q4 report of a fifth quarter in a row of declining EPS (-11% to $1.17, despite a 4% pickup in sales) and is up more than 5% year-to-date. Watch to see if the stock can climb back near its 200-day moving average, near 63 for now. Kohl’s ( KSS )  ($8.7 bil market cap) and Dillard’s ( DDS ) ($3 bil), both forecast to grow FY 2017 profit by 6%, are also struggling to regain their long-term 200-day moving averages.

Can Apple Supplier Broadcom Afford Another Shopping Spree?

Apple ( AAPL ) supplier Broadcom ( AVGO ) could follow its $37 billion Avago Technologies merger by shedding $1 billion in assets to launch another M&A charge, says MKM analyst Ian Ing. Ing reiterated his buy rating on Broadcom stock, but cut his price target to 160 from 163, citing wireless seasonality. Broadcom stock rose 1.7% Wednesday and was up a fraction in afternoon trading in the stock market today , near 131. The companies completed their merger on Feb. 1, taking the Broadcom name but keeping the Avago stock ticker. When announced last March, it kicked off a record-busting $100 billion in 2015 chip sector M&A deals. Analysts say the frenzy shows no sign of slowing as organic growth decelerates and costs rise. But the chip sector has been quiet on the M&A front this year. Broadcom will likely sell $500 million in assets to de-lever from its Q1-completed merger, Ing wrote in a research report. “For Broadcom, data center/networking product cycles have become more meaningful,” he wrote. “And the story increasingly revolves around a quick deleverage and return to semiconductor consolidation via accretive deals.” A number of small chipmakers — $2 billion and less market caps — are eyeing Broadcom’s design team and business units, Ing wrote. Although $1 billion would be a fast deleverage, half that is more likely. “We do not expect as significant monetization of Broadcom units as occurred with LSI,” Ing wrote. Avago acquired LSI in May 2014 for $6.6 billion, then sold LSI’s flash unit to  Seagate Technology ( STX )  for $450 million and LSI’s networking business to  Intel ( INTC ) for $650 million. Post-merger, Broadcom is less exposed to Apple, which is experiencing slowing iPhone sales. In January, a Credit Suisse analyst estimated 24% of the former Avago’s sales stemmed from Apple. The former Broadcom was 14% tied to Apple in 2014. Joined, Broadcom-Avago gets about 8%-9% of its sales from Apple, Ing estimated. Broadcom is slated to report fiscal Q1 earnings after the close March 3.