IBM stock suffered its worst one-day decline on record after the technology group admitted that customers were moving money away from its products and towards urgently needed data-centre infrastructure.
The stock plunged 25.2% to $217.07 on Tuesday, leaving it just above its 52-week low, after preliminary second-quarter revenue and profit missed Wall Street forecasts.
Yet Barclays analyst Saket Kalia sees a potential winner on the other side of that spending shift: network-security companies selling firewalls.
As per TipRanks, his industry checks identified Palo Alto Networks, Fortinet and Check Point as potential beneficiaries.
Palo Alto Networks offers scale, but little valuation cushion
Palo Alto Networks is one of the world’s largest firewall providers and gives customers a broad portfolio spanning network, cloud and security operations products.
Its position makes it an obvious beneficiary when companies prioritise cybersecurity spending over less urgent software projects.
The stock climbed 6.8% to $352.89 on Tuesday as IBM’s warning drew attention to the resilience of security budgets.
Kalia’s analysis suggested that demand for firewall hardware was benefiting from the same urgency pushing companies to secure servers and memory before costs rise further.
The difficulty is valuation. TipRanks’ comparison tool showed no analyst-implied upside for Palo Alto at Tuesday’s closing level.
Its average 12-month target was $333.31, below the market price, despite a Strong Buy consensus.
Fortinet provides the clearest evidence of pulled-forward demand
Fortinet supplied Kalia with the strongest numerical evidence that customers are already buying more security hardware.
Its first-quarter product revenue jumped 41% from a year earlier to $645 million, while total revenue rose 20% to $1.9 billion.
Kalia pointed to that product strength as evidence that the shift was appearing in firewall sales rather than remaining a theoretical opportunity.
The company specialises in FortiGate firewalls and builds many of its own security processors, allowing it to offer high-performance appliances at competitive prices.
That could be particularly attractive when customers need greater network capacity to protect expanding AI infrastructure.
Fortinet shares gained 3.9% to a record $166.83 on Tuesday. But, like Palo Alto, the rally has overtaken the broader analyst consensus.
TipRanks listed an average target of about $117, while Barclays’ own latest target was $155 and TD Cowen recently raised its target to $215.
Check Point offers the only consensus upside
Check Point was the most modest gainer of the three, rising 2% to $137.02, but it offered the clearest valuation case.
The platform showed a Moderate Buy consensus and an average target of $148.36, implying almost 9% upside from the price used in its analysis.
The target was based on 12 Buy and 18 Hold ratings, with no Sell recommendations.
Check Point has traditionally been viewed as a slower-growing but profitable cybersecurity company.
That positioning could become more attractive if the current spending shift favours established firewall vendors without supporting the premium valuations attached to faster-growing rivals.
Still, Kalia included an important warning. The boost “could be temporary,” because companies may simply be bringing purchases forward to avoid supply constraints and higher prices.
Once that wave passes, the sector could experience a digestion period similar to the slowdown that followed pandemic-era technology spending.
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