Palo Alto Networks (PANW) Stock Rallying on Strong Earnings

NEW YORK (TheStreet) -- Shares of Palo Alto Networks (PANW) are rallying by 3.85% to $166.84 in mid-morning trading on Thursday morning, after the company posted strong third quarter earnings results, which beat analysts' expectations.

Yesterday, the company reported revenue of $234.2 million, or 23 cents per share, compared to revenue of $150.7 million, or 11 cents per share in the same quarter a year ago. Overall, revenue for the fiscal third quarter 2015 grew by 55% when compared to the year ago period.

Analysts polled by Thomson Reuters were expecting Palo Alto Networks to report earnings of 20 cents per share on revenue of $223.22 this quarter.

After the California-based company released its quarterly report, analysts at Deutsche Bank raised their price target to $200 from $170.

"Year-over-year growth was driven by new customer acquisition and expansion in existing accounts, resulting in substantial growth across all three components of our business: product, recurring subscription and support," CEO Steffan Tomlinson said.

Palo Alto Networks provides enterprise security platform to service providers and government entities worldwide.

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 find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PANW's very impressive revenue growth greatly exceeded the industry average of 2.8%. Since the same quarter one year prior, revenues leaped by 54.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 152.10% over the past year, a rise that has exceeded that of the S&P 500 Index. 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 0.92 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 1.95 is high and demonstrates strong liquidity.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Communications Equipment industry average. The net income has decreased by 7.7% when compared to the same quarter one year ago, dropping from -$39.95 million to -$43.01 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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