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Why Palo Alto Networks Is a Buy Ahead of Earnings

However, in the meantime, Palo Alto will need to take more steps to increase its market share. To do that, the company must figure out ways to maintain revenue without significantly reducing costs and hurting margins. This is the only way for the stock to work in the long term and for the company to grow into its valuation, which, quite frankly, is still high. But we will see which direction it goes.

The company is expected to report fiscal first-quarter earnings on Thursday after the market close. The challenge will be to beat expectations while also raising its outlook if it wants to continue its momentum.

However, considering the tough macro-climate, which has resulted in very few beat-and-raise reports, it would be a surprise to see if Palo Alto can be one of the few to do it. I won't be holding my breath. Regardless, it would be very encouraging to see sustained revenue momentum coming in north of 30% year over year.

Will this be enough to excite a scared market? Nonetheless, the stock is worth a decent look at current levels. As I've said, it is not cheap by any means. But for long-term investors with a good appetite for risk, this is one that has the potential to pay off handsomely if a few things fall into place.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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