Palo Alto Networks (PANW) Stock Declining Today Despite Credit Suisse Price Target Increase

Shares of Palo Alto Networks (PANW) are down despite Credit Suisse's price target hike to $165 from $135, while maintaining an 'outperform' rating.
By Krysta Michaelides ,

NEW YORK (TheStreet) -- Shares of Palo Alto Networks (PANW) - Get Report are down 1.62% to $143.61 in morning trading Tuesday despite Credit Suisse's price target hike to $165 from $135, while maintaining an "outperform" rating. 

"The company is positioned to continue to gain market share given the many unique advantages of its next-generation firewall platform," analysts said. 

In its second fiscal quarter of 2015, Palo Alto reported earnings of 19 cents per share and $217.7 million in revenue, versus the consensus of analysts' earnings estimates of 17 cents per share and $204 million in revenue. 

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Analysts expect fiscal year earnings of $2.89 per share and revenue of $885.7 million in 2015, versus earnings of $1.51 per share and revenue of $598.2 million in 2014. Credit Suisse also estimates earnings and revenue of $4.47 per share and $1.22 billion, respectively, in 2016.

Palo Alto Networks offers a network security platform that allows enterprises, service providers, and government entities to secure their networks.

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, solid stock price performance 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:

  • PANW's very impressive revenue growth greatly exceeded the industry average of 0.5%. Since the same quarter one year prior, revenues leaped by 50.0%. 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.
  • Compared to its closing price of one year ago, PANW's share price has jumped by 88.07%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • PANW's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that PANW's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.46 is high and demonstrates strong liquidity.
  • 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 282.5% when compared to the same quarter one year ago, falling from -$7.86 million to -$30.07 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
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