NEW YORK (TheStreet) -- Shares of Palo Alto Networks, Inc. (PANW - Get Report) are up 4.17% to $84.60 in heavy trading volume after Morgan Stanley (MS - Get Report) earlier today reiterated an "overweight" rating on the stock, and raised the price target to $105 from $90.
The firm said that "a combination of multiple new products and slower growth in its costs could boost free cash flow 45%" in 2015.
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 solid stock price performance. 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 2.6%. Since the same quarter one year prior, revenues rose by 48.8%. 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for PALO ALTO NETWORKS INC is currently very high, coming in at 76.67%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -97.27% is in-line with the industry average.
- 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 1913.0% when compared to the same quarter one year ago, falling from -$7.28 million to -$146.59 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