The Nasdaq Composite Index (^IXIC 0.45%) is roughly flat today, Aug. 4, at 2:15 p.m. ET. It's a bit of a bounce-back day for a number of tech stocks that have stumbled in recent days post-earnings. However, the most popular cybersecurity stocks are decidedly not having a good day, following the release of second-quarter earnings from Fortinet (FTNT 1.64%) Wednesday afternoon. At the time of this writing, Fortinet shares are down almost 17%, while Palo Alto Networks (PANW 1.64%), CrowdStrike (CRWD 0.99%), and Zscaler (ZS -0.62%) shares are down between 5.4% and 3.3% on the day.
One of today's best-performing Nasdaq stocks is Latin American payments and e-commerce leader MercadoLibre (MELI -0.81%). Shares are up 16% after the company reported second quarter results that investors loved.
Fortinet: Investors spooked after guidance, weaker cash flow
Cybersecurity stocks, as a cohort, have held up better this year than many other high-growth tech stock sectors. So far this year, shares of Palo Alto Networks and CrowdStrike are down about 22%, while Fortinet shares are down 27%. Before today, the three were down in the teens this year, not a good result, but certainly less bad than plenty of tech stocks in 2022. One key reason is the increasing importance of cybersecurity for organizations of all kinds. As digital transformation ramps up, data security is an imperative, not a luxury, and investors have increasingly viewed the prospects for these companies as being more stable and less likely to be upended by the economic climate.
However, Fortinet's second-quarter earnings report -- or specifically management's Q3 guidance -- might have put some cracks in the wall. The company expects $1.12 billion in revenue this quarter, lower than what Wall Street analysts were counting for in their models. The result is fueling today's sell-off as investors fear that growth could slow even in cybersecurity. With many of the top stocks in the market still reporting GAAP losses and some still burning cash at the operating level, investors are taking a step back to reevaluate things.
MercadoLibre: Payments growing by triple digits, e-commerce up 23%
The leading online shopping and payments platform in Latin America saw combined revenue increase 57% adjusted for currency differences, to $2.6 billion. Operating income surged 51%, while earnings per share were up 77%. The company beat Wall Street's best guess on both the top and bottom lines, as customers bought more goods from its online store and used Mercado Pago to pay for more of those goods and to pay for more things off the company's platform.
With this report coming after many U.S. e-commerce companies have reported less-impressive sales growth, investors are far less concerned about the prospects for MercadoLibre now. While maybe not in a nascent stage anymore, e-commerce and digital payments are still much earlier in their proliferation in Latin America, and MercadoLibre is the undisputed leader there.
Looks like opportunity for buyers
Today's sell-off in cybersecurity stocks and the strong results from MercadoLibre underscore the opportunities available to long-term investors. While the sellers see cracks in the foundation of the potential for cybersecurity, the reality is that the thesis remains very strong, and investors who think (and act) in multiyear time horizons should consider buying shares of the leaders like CrowdStrike, Fortinet, and Zscaler on days like today. For MercadoLibre, even with today's gains, shares still trade at some of their lowest revenue-based valuations in years.