Shares of Palo Alto Networks, the cyber security software maker, surged after the company said fiscal third-quarter sales topped Wall Street expectations and it had settled an outstanding lawsuit with Juniper Networks.
Palo Alto said the settlement, which will see both companies license patents at issue to one another, will cost it $175m. Both companies also agreed not to sue each other for eight years.
Sales rose 49 per cent in the three months to April 30 from a year earlier to $151m.
The company’s net loss in the period widened, however, to $139m, or $1.86 per share. The loss included a legal charges of $114m.
Analysts with Citigroup raised their price target on Palo Alto to $76, citing both the absence of a potential Juniper-related royalty, as well as higher expected profits and operating margins.
“Stock will probably immediately reflect the removal of the litigation risk,” Citi’s Walter Pritchard said. “This risk has been present since IPO and has made the stock un-investible for some.”
Shares in Palo Alto ended the day 5.27 per cent higher at $73.17 while Juniper Networks closed up just under 1 per cent at $25.45.
Apple shares rose 1.82 per cent to close at $635.38, its highest level in more than 18 months, after announcing a $3bn deal to buy Beats headphone and music business that will bring onboard Beats co-founder and music producer Jimmy Iovine and Dr Dre.
Twitter shares continued a three-day advance, initially rising as much as 4 per cent before settling back to close 0.68 per cent higher at $34, after analysts at Cantor Fitzgerald lifted their view of the social media company.
The upgrade to “buy” from “hold” came a day after analysts at Nomura did the same, taking the proportion of investment banks who recommend the shares to nearly 30 per cent – the most since December.
Cantor analyst Youssef Squali said the share price had much to do with unrealistic comparisons with Facebook, as well as the expiry of a lock-up period over shares at the start of May, echoing comments from a growing list of analysts.
“We don’t believe Twitter has to mirror Facebook’s strategy or approach its size to be very successful and for its stock to generate meaningful returns over time,” he said.
The analyst forecast that Twitter could double its user base over the next five years “while materially driving monetisation and increasing revenue/ebitda at [about] 50 per cent and [about] 80 per cent, respectively”.
Mr Squali believed one comparison with Facebook was warranted, even if Twitter lagged behind its rival in size.
“Given the advent of video, MoPub and better targeting, we believe Twitter’s monetisation should improve further, catching up to Facebook’s at $2 to $3 per monthly active user per quarter currently, driving much of the revenue.”
Since the week’s start, Twitter shares have risen about 10 per cent.
Discounting and product overhauls narrowed the drop in revenues and led to smaller than expected losses for the group.
Shares in Booz Allen Hamilton fell from a recent peak, down 6.39 per cent to $22.12, after the US consulting group announced the sale of 10m shares by an affiliate of the Carlyle Group.
On completion of the offering, Carlyle will own about 45.8 per cent of Class A common stock of Booz Allen. The stock hit a high of $25.32 on May 13.
Overall, US equity investors took heart from positive economic statistics to lift the S&P 500 index slightly to a fresh record high.
The S&P 500 closed 0.54 per cent higher at 1,920.03 while the Dow Jones Industrial Average rose 0.39 per cent to 16,698.74 and the Nasdaq Composite added 0.54 per cent to end the day at 4,247.95.
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