Story updated at 10 a.m. to reflect market activity.
Palo Alto gained 0.1% to $68.21 in morning trading.
The firm set a price target of $80 for the stock. Analysts Erik Suppiger and John Lucia said Palo Alto is quickly becoming a leader in the Advanced Persistent Threat (APT) protection market.
"With approximately three weeks left in the quarter, our initial checks suggest sales are tracking at or above plan and that the company is executing well with channel partners," the analysts wrote. "We also believe Palo Alto is expanding its differentiation with its APT service, WildFire, and that it has a significant time-to-market advantage over its competition."
Separately, TheStreet Ratings team rates PALO ALTO NETWORKS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PALO ALTO NETWORKS INC (PANW) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 0.9%. Since the same quarter one year prior, revenues rose by 46.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- PANW has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, PANW has a quick ratio of 2.00, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 1428.7% when compared to the same quarter one year ago, falling from -$2.61 million to -$39.95 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, PALO ALTO NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: PANW Ratings Report