Palo Alto Networks (PANW) - Get Palo Alto Networks, Inc. Report surged to a record high Tuesday after the cybersecurity group topped Wall Street forecasts with its fourth quarter earnings while boosting its 2022 profit outlook amid a wave of damaging attacks on U.S. companies over the past year.
Palo Alto Networks said 2022 revenues would likely rise between 24% and 25%, imply a topline of between $5.275 billion and $5.325 billion after posting a Street-beating adjusted fourth quarter profit of $1.60 per share.
Annualized recurring revenue from its next-generation security division ended the fiscal year a $1.18 billion, just ahead of management's $1.15 billion target, with forecasts for the key industry metric in the region of $1.68 billion for 2022.
"We’ve had a series of cybersecurity events over the last quarter, against the backdrop where we’ve seen supply chain attacks where bad actors try to hack into core infrastructure pieces, which allows them access to enterprises or government systems," CEO Nikesh Arora told investors on a conference call late Monday. "These vulnerabilities are being exploited by ransomware actors. The ransomware threat continues to rise. Our Unit 42 team research shows that the average ransom demand in the first half of this year grew from $5.3 million, which is up 518% year-over-year."
"What these attacks are highlighting is the constant shortcomings of enterprises, and of government infrastructure, continually spurring demand and consolidation as companies revalue their cybersecurity posture," he added. "It’s against this backdrop that our platform approach is working."
Palo Alto Networks shares were marked 15.8% higher in early trading Tuesday to indicate an opening bell price of $430.00 each, a move hat would extend the stock's year-to-date gain to around 23%. The stock hit an all-time high of $438.49 each earlier in the session.
Bloomberg News reported Tuesday that Apple (AAPL) - Get Apple Inc. (AAPL) Report CEO Tim Cook, as well as Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report boss Satya Nadell and Amazon's (AMZN) - Get Amazon.com, Inc. Report Andy Jassy, will attend a White House cybersecurity summit later today aimed at address the recent wave of ransomware and cyber attacks in major American companies.
Only last week, T-Mobile US (TMUS) - Get T-Mobile US, Inc. Report said more than 53 million people were hit by a data breach that included social security numbers, birth records and driving license details.
"The quarter was stronger than anticipated, and the strength of FY22 revenue guide is helping support margins that are in line with or modestly below-consensus estimates, against a backdrop of very low investor expectations," said BMO Capital Markets analyst Keith Bachman, who lifted his price target on the stock to $480 each with an outperform rating following last night's earnings beat.
"As we look longer term, we think Palo Alto Networks has the opportunity to gain wallet share by consolidating security spend, enabled by the strength of its broad portfolio," he added. "Further, we think investors will appreciate a slowdown in M&A in FY22, which presumably will help margins. Finally, we think the analyst event could help serve as a catalyst by providing more depth and clarity around growth and margin drivers."