What happened
Shares of cybersecurity companies CrowdStrike (CRWD 2.20%), Palo Alto Networks (PANW 0.30%), and Zscaler (ZS 0.42%) were volatile today as investors continued to process the news about slowing job growth, comments about the cybersecurity industry made by a handful of analysts, and rising fears of a potential recession.
The mix of news caused these stocks to fall initially today, with some regaining ground later in the trading day. Each stock had fallen by more than 2% by midmorning, but by 12:35 p.m. CrowdStrike was up by 0.2%, Palo Alto Networks was down by 0.9%, and Zscaler was up by 1.6%.
So what
There are several reasons for the erratic share price moves today, including probably the most important bit of news: the latest jobs data. Yesterday, ADP issued its latest jobs report, which showed that private-sector jobs increased by just 145,000 in March, down from 261,000 jobs in February and far below the estimate of 210,000 for the month.
Image source: Getty Images.
All investors are keeping a close eye on the jobs market right now, but tech investors are likely especially interested in the numbers because the sector has already been hit hard by hiring freezes and layoffs. After a boom in hiring during the height of the pandemic, technology companies have pared back their numbers recently, cutting 130,000 tech jobs year to date.
Cybersecurity companies have been part of the cutbacks as well, with Zscaler announcing just last month that it's cutting 3% of its workforce.
More jobs data will be available tomorrow, when the Labor Department releases its nonfarm payroll numbers for March. In general, investors have been concerned that the Federal Reserve's interest rate hikes could end up putting too much pressure on the labor market, which is stoking fears that a potential recession is around the corner.
On a positive note, some recent comments from analysts may have helped CrowdStrike's stock rebound from its initial dip this morning. Yesterday, analysts at Needham said that CrowdStrike has "a compelling strategy replete with robust long-term goals," and Morgan Stanley analyst Hamza Fodderwala said that "the bear case is becoming harder to defend" against the company.
Those comments likely buoyed CrowdStrike's stock later in the trading day, and that sentiment may have been picked up by other cybersecurity investors today as well.
Now what
The volatility of these cybersecurity stocks today is a snapshot of how tech investors are feeling right now. Some of them are looking at the latest jobs data and getting worried, while others are looking for any good bit of news, like analysts' comments, and are buying shares based on that.
The most important thing for long-term investors to do when share prices are erratic is to revisit your original investment thesis and try to figure out if anything has fundamentally changed with the company. Doing so will help you keep a level head while other investors are buying and selling based on the daily news.
While CrowdStrike, Palo Alto Networks, and Zscaler could experience some more share price swings as investors continue to weigh the possibility of a potential recession, keeping a long-term view of these companies could help prevent you from making a shortsighted investment decision.
