The good news is, unlike the guidance issued in the May quarter, Palo Alto management seems a bit more optimistic about fiscal first-quarter results. The company expects revenue to be in the range of $118 million to $122 million, which is slightly above Street estimates by $1 million. As I've said previously, revenue growth is one of the things that Palo Alto already does well.
Meanwhile, earnings-per-share is expected to come in at 7 cents, in line with estimates. In my opinion, Palo Alto needs a 2-cent beat for the company to erase long-term operational concerns. And given that a Cisco/Sourcefire union might begin to add pressure on Palo Alto's margins, a profit beat (of any kind) will come at a significant cost. It would mean that Palo Alto would have to under-invest in growth areas or find new ways to better manage growth.
In the meantime, I still wouldn't rule out an acquisition, though. I believe even with Cisco's acquisition of Sourcefire, Cisco is still likely the best suitor. Until that day comes, however, I believe Palo Alto should continue to put up gaudy growth numbers for several more quarters. But absent meaningful signs of leverage, this stock will remain a risky bet.At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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