What happened
It was another tough day for the markets. Bad news on the inflation front got the week off to a bad start, and it was capped off by missed revenue and profits by FedEx, which is widely viewed as a bellwether on the economy.
The negative market sentiment overshadowed one positive analyst comment on Palo Alto Networks (PANW 1.45%). MKM Partners started coverage of the stock with a buy rating and a $250 price target. The news wasn't enough to lift the stock, which was down 4% as of 1:20 p.m. ET on Friday.
So what
FedEx announced weak results for its latest quarter, which raised investor fears that the economy is rolling over into a recession. The company said results were "adversely impacted by global volume softness that accelerated in the final weeks of the quarter." This echoes results from top retailers, such as Walmart, that noted weak consumer purchasing behavior in its last earnings report.
Digital services have been one strength in the economy this year. Cybersecurity leader Palo Alto Networks reported a 27% increase in revenue in its most recent quarter, and its competitors, including SentinelOne and CrowdStrike Holdings, also posted strong results.
Now what
There are good reasons to expect spending on mission-critical areas like cybersecurity will hold up during a recession. Cyber threats are certainly not going to stop just because the economy stalls, so businesses will have to spend to protect their data.
However, higher inflation is the greatest risk for Palo Alto's stock in the near term. The Federal Reserve is expected to raise interest rates to bring an end to inflation, and that could further pressure stocks that trade at high valuations like Palo Alto.
