Palo Alto

Palo Alto (PANW - Get Report)  analysts came away largely positive from the cyber security company's quarterly earnings report and outlook issued after the market close on Wednesday. 

After initially falling after hours on Wednesday, the stock was rising 7.32% to $215.16 a share Thursday morning. 

Palo Alto earned an adjusted $1.47 per share for the quarter, surpassing Wall Street's expectations of $1.42. Revenue was $805.8 million, beating expectations of $803 million. Billings were $1.1 billion, rising 22% year-over-year and beating analysts estimates of $995 million. Management guided for current quarter ranges of revenue of $760 million to $770 million, billings of $875 million to $890 million and EPS between $1.02 to $1.04. 

Here's what the analysts said:

JPMorgan, Overweight, Price Target Raised to $300 From $270

"The fourth quarter results were good, but the analyst event with management outlining the roadmap through 2022 from a product, go to market, and financial perspective is in our view exactly what the market needed. PANW has been proactively building a very good cloud security (security-in-the-cloud and access-to-the-cloud) business both organically and through acquisition, and the strategy ahead will drive the revenue mix further to subscription software over the next three years and in our opinion secures the growth for the future. The market had been fearing a major transition, but management presented a reasonable path to 2022 that includes near term investment that we think is needed for the longevity of the PANW franchise in cyber security." 

- Sterling Auty 

Credit Suisse, Underperform, Price Target Raise to $195 From $185

"Revenues and billings are guided to ~20% 3-year compound annual growth rates, above our previously expected fiscal year 2020 growth of 18%/14%. PANW expects ~$1.75B fiscal year 2022 billings from 'next gen security'; implying core firewall grows ~10% assuming duration contracts by ~10% to 2.6 years. This is still above ~mid-to-high single digit market growth, and perhaps greater if assuming hyper growth Prisma/Cortex products are seeded or carved out of firewall transactions."

- Brad Zelnick

Morgan Stanley, Overweight, $290 Price Target 

"A fourth quarter inflection in growth for the Next Generation Cloud Security platforms validates the aggressive expansion strategy and forms a strong foundation for management's 20%+ 3 year growth target. At 16 times calendar year 2020 free cash flow, a durable 20%+ free cash flow growth is not reflected in shares. Coming into fourth quarter and the Analyst Day, PANW shares had been pressured by a multitude of investor concerns ranging from negative free cash flow impacts from an impending model transition, secular pressures on the core firewall market, transformational acquisitions on the come and a high level of executive turnover. The company put forward a compelling argument against all these concerns with - a solid fourth quarter billings performance (+22% year-over-year)." 

- Keith Weiss

JMP Securities, Outperform, Price Target $250

"Fourth quarter results reflect strength in the company's core business, but management guided first quarter 2020 and fiscal year 2020 EPS significantly lower due to increased investment in the company's next-generation security products. Palo Alto's next-generation security products grew 180% year-over-year. Management committed to billings and revenue growth of 20% over the next three years, fueled in part by next-generation security products that management estimates will increase from 13% of billings in fiscal year 2019 to 30% in fiscal year 2022, reflecting a compound annual growth rate of 57%. Despite investor concerns over the maturity of the firewall market, management committed to growing the company's core firewall business at a 23% compound annual growth rate from fiscal year 2019 through fiscal year 2022."

Erik Suppiger

 

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