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What Happened in the Stock Market Today

By Demitri Kalogeropoulos – Nov 22, 2016 at 5:49PM

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Palo Alto Networks and Dollar Tree stocks stood out as indexes hit fresh records on Tuesday.

Image source: Getty Images.

The rally in stocks continued on Tuesday as the Dow Jones Industrial Average (^DJI 1.00%) crossed 19,000 for the first time and the S&P 500 (^GSPC 1.42%) added to its hefty gains for the year. Each index added roughly 0.3% on the day.

Today's stock market:


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S&P 500



Data source: Yahoo! Finance.

Oil price volatility produced a slight drop in the United States Oil ETF (USO -0.62%) following Monday's 4% spike as investors tried to discern whether the Organization of the Petroleum Exporting Countries will agree to a production cut at its meeting next week. Meanwhile, bank stocks attracted heavy trading volume as the Financial Select Sector SPDR ETF (XLF 1.47%) ticked higher.

As for individual stocks, Palo Alto Networks (PANW 0.75%) and Dollar Tree (DLTR 0.20%) stocks made headlines with unusually large moves following their quarterly earnings announcements.

Palo Alto Networks

Palo Alto Networks' shares dove 13% after its third-quarter earnings announcement forecast slowing growth. The cybersecurity specialist's big-picture operating numbers were solid, with sales rising 34% to just meet executives' prior guidance.

Palo Alto gained 1,500 new customers to bring its customer base to 35,500 worldwide. "Our results underscore that our next-generation security platform uniquely solves customers' most complex security challenges," CEO Mark McLaughlin said in a press release. 

Image source: Getty Images.

Results were also healthy on the bottom line, where the company generated $0.55 per share of non-GAAP earnings to beat management's forecast of $0.52 per share. Yet Wall Street reacted harshly to the latest official outlook that called for growth to slow to a surprisingly weak pace next quarter. McLaughlin explained in a conference call that large customers are pushing their purchasing decisions out, which is lengthening the overall sales cycle. This unfavorable trend put pressure on the current quarter's results and convinced management to lower its projection for the fourth quarter as well.

Palo Alto's 28% projected growth pace for next quarter was below consensus estimates and implies that forecasts for 2017 might also be too optimistic. Key long-term metrics such as customer acquisition rates, market share, and customer lifetime value are pointing in the right direction, but that wasn't enough to satisfy Wall Street analysts focused on the weakening short-term revenue trends.

Dollar Tree

Dollar Tree shares spiked 9% after the discount retailer posted solid third-quarter operating results. Comparable-store sales growth improved to a 1.7% pace from 1.2% in the prior quarter thanks to balanced gains in both customer traffic and average spending per trip. 

Gross profit margin also rose, ticking up to 30% of sales from 28% as Dollar Tree reaped financial benefits from its 2015 acquisition of the Family Dollar business. This massive merger is still ongoing, but there are already signs that management is succeeding at raising that segment's profitability toward Dollar Tree's corporate average. In fact, overall operating margin improved to 6.8% from 4.5% in the year-ago period. "Our results demonstrated a solid performance in our Dollar Tree segment [and] continued meaningful progress in our integration of Family Dollar," CEO Bob Sasser said in a press release.

Sasser and his executive team boosted their earnings outlook but left their full-year sales growth target unchanged. While higher profits are encouraging, investors were even more pleased with the news that customer traffic trends are improving heading into Dollar Tree's most important quarter of the year.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Palo Alto Networks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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