Investors were somewhat nervous coming back from the Independence Day holiday, as major market indexes gave up a bit of ground on Wednesday at midday. Wall Street has enjoyed strong upward momentum throughout much of 2023, but some market participants seem increasingly concerned that stock prices have gotten ahead of themselves.
Yet even that hesitation didn't hold shareholders back from sending a couple of stocks to new all-time record highs. Palo Alto Networks (NASDAQ: PANW) has benefited greatly from digital transformation efforts across the corporate world, as the need for cybersecurity services has grown substantially. Elsewhere, AutoNation (NYSE: AN) has also been in the right place at the right time, taking advantage of spiking used car prices. Below, you'll learn more about what sent these two stocks to record levels and whether there's more room to push higher from here.
Palo Alto takes advantage of AI
Shares of Palo Alto Networks were up about half a percent on Wednesday, but that was enough to send the cybersecurity specialist to a new record level. Indeed, the stock has nearly doubled just since the beginning of 2023, and it's riding a huge wave of upward momentum based on excitement concerning artificial intelligence (AI).
Cybersecurity companies have to assess threats continually, and that gives them volumes of data to sift through and interpret. That makes cloud security, network security, and security operations fertile ground on which to train AI algorithms, which depend on streams of new data that they can use to learn and adapt. Moreover, with so many threats to assess, Palo Alto can't hope to defend against them all without bringing automation to the fore.
Also, as bad actors start to use AI for nefarious purposes, Palo Alto is gaining a reputation as being best positioned to defend against AI-enhanced cyberattacks. In its most recent quarter, Palo Alto's sales climbed 24% year over year, and it continued to bring in huge numbers of new clients while also expanding relationships with its current customers.
The AI age is only now getting started, and Palo Alto has a long runway of potential future growth ahead of it. As long as it executes well from a business standpoint, Palo Alto could see its stock keep climbing even from here.
AutoNation keeps driving forward
Meanwhile, shares of AutoNation climbed 1%. Up by more than 50% since the beginning of the year, the vehicle dealership giant is riding favorable trends in the industry.
The most recent push higher for the stock came amid favorable comments from Wall Street analysts. Benchmark boosted its price target on AutoNation by $15 per share to $200. Citing strong sales of cars and trucks of all kinds, the analysts believe that the stock has further to run.
That's easy to understand from recent performance. Based on earnings over the past 12 months, AutoNation trades a multiple of just 7. Even with expectations that its bottom line will recede as conditions return to normal, forward multiples remain in single-digit territory.
The used car business is highly competitive, and some industry players have found themselves facing financial challenges. However, AutoNation remains a steady performer, and that leaves open the possibility that the stock could gain even more ground even after a strong start to 2023.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
