MSFT - Wall Street Breakfast Podcast: Palo Alto Under Pressure From Microsoft

2023-07-13 06:39:10 ET

Summary

• Palo Alto Networks' stock fell over 7% following Microsoft's entry into the cybersecurity market, posing a threat to companies like Palo Alto, Zscaler, and Cloudflare.
• Medalist Diversified REIT announced a suspension on dividends for its common and preferred stock for at least six months, leading to a premarket drop of over 2%.
• Tesla CEO Elon Musk launched a new company aimed at helping humanity understand the nature of the universe and reality, with a team composed of former employees from DeepMind, Google Research, Microsoft Research, Tesla, and OpenAI.

Listen below or on the go on Apple Podcasts and Spotify Why did Palo Alto Networks (PANW) stock drop? Blame Microsoft (MSFT). (00:26) Medalist (MDRR) to suspend dividends for at least the next six months. (01:38) Elon Musk unveils xAI to 'understand reality' and 'true nature of universe.’ (02:21)

This is an abridged transcript of the podcast.

Palo Alto Networks (NASDAQ: PANW ) fell more than 7% on Wednesday.

This happening after Microsoft (NASDAQ: MSFT ) announced it’s entry into the cybersecurity market .

Morgan Stanley analyst Hamza Fodderwala said the secure service edge offering is potentially the "largest and last" major cybersecurity market that Microsoft has yet to enter.

Fodderwala added that Microsoft's ( MSFT ) offerings of Microsoft Entra Internet Access (for web and SaaS apps) and Entra Private Access (for private and internal apps) puts it squarely against companies like Palo Alto Networks ( PANW ), Zscaler ( ZS ) and Cloudflare ( NET ).

Wednesday ZS fell 6.6% and NET lost ground by nearly 5.5%.

UBS analyst Roger Boyd added that Microsoft's ( MSFT ) "broad exposure" with roughly 1M security customers gives the company "an advantage in becoming the market leader down-market, where neither ZS or PANW have significant exposure today."

However, companies with small and medium-sized business exposure, such as Cisco ( CSCO ) and Cloudflare ( NET ), have greater near-term risk from Microsoft's ( MSFT ) move.

Medalist Diversified REIT (NASDAQ: MDRR ) said on Wednesday that it was suspending dividends on its outstanding common stock and preferred stock for at least the next six months.

Premarket Medalist is down more than 2%.

The company said it had concluded its review of strategic alternatives , and had decided to sell its interests in four properties from its portfolio. It was also exploring mergers, investments or other strategic combinations.

Medalist said that it had started discussions with an external manager as to an internalization of its management. It expects the internalization to cut costs, streamline operations and result in changes in several leadership roles.

Twitter and Tesla (NASDAQ: TSLA ) CEO Elon Musk unveiled a new company on Wednesday, xAI .

The goal of the company is to understand "the nature of the universe” and help humanity "understand reality."

According to the company's website , xAI will hold a Twitter Spaces event on July 14. Members of the team will be introduced and they’ll answer questions.

The website adds that the company's employees have previously worked at DeepMind, Google Research (NASDAQ: GOOG ) ( GOOGL ), Microsoft Research (NASDAQ: MSFT ), Tesla ( TSLA ) and OpenAI, and the University of Toronto.

The site also lists several of the team's accomplishments, including the working on GPT-3.5, GPT-4 and Transformer-XL.

The company is being advised by Dan Hendrycks, who currently serves as the director of the Center for AI Safety.

Other headlines to look out for on Seeking Alpha:

Bob Iger to continue as Disney CEO until end of 2026

Sarcos to terminate 25% of its workforce, withdraws full-year revenue guidance

Chips rise after Nvidia $50M AI investment, Broadcom deal approval

FTC appeals judge's OK for $69B Microsoft-Activision deal (updated)

On our catalyst watch for the day, Federal Trade Commission Chair Lina Khan is set to testify before the House Judiciary Committee for the first time.

The hearing comes after the committee chairman Jim Jordan (R-OH) subpoenaed Khan in April for documents related to the agency's alleged actions against Twitter.

And OPEC will publish its monthly Oil Market Report.

U.S. stocks on Wednesday ended higher after the latest consumer inflation data showed a moderation.

The Nasdaq ( COMP.IND ) added 1.15%. The S&P 500 ( SP500 ) gained 0.74%. The Dow ( DJI ) underperformed the other two averages, advancing 0.25%.

Nine of the 11 S&P sectors ended trading in the green, led by Communication Services and Utilities. Health Care and Industrials were the two losers.

Treasury yields fell as market participants picked up bonds. The 10-year yield ( US10Y ) was down 12 basis points to 3.87%, while the 2-year yield ( US2Y ) retreated 15 basis points to 4.75%.

Though the CPI data dominated headlines on Wednesday, investors also digested the Fed's Beige Book report on regional economic activity, which showed a slight increase in U.S. economic activity since late May.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are pointing higher. The Dow is up 0.2%, the S&P 500 is up 0.4% and the Nasdaq is up 0.7%. Crude oil is flat more than $75 a barrel. Bitcoin is down 0.4%.

In the world markets, the FTSE 100 is up 0.2% and the DAX is up 0.5%.

On today’s economic calendar, at 830 am initial jobless claims. Also at 830am the producer price index. The Producer Price Index report is expected to show a 0.2% month-over-month increase.

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