What's behind Palo Alto's earnings sell-off — and how to proceed

Key points

• Shares of Palo Alto Networks are down over 4% Wednesday, despite the cybersecurity provider delivering strong quarterly results the prior evening.
• This next-day move may seem a bit odd, given the company not only exceeded expectations for the reported quarter, but also issued guidance ahead of expectations for the current three-month period.
• So, what is the culprit?
• It may have to do with Palo Alto's longer-term outlook, coupled with the fact shares were scorching hot into the print — a setup that always raises the bar and increases the odds of a post-earnings pullback.
• On Tuesday night, Palo Alto did raise its outlook for hardware growth over the next few quarters — think firewall boxes installed at data centers, enterprise campuses and industrial environments.