3 ETFs to Buy if You Think Palo Alto Networks Will Beat Earnings

Palo Alto Networks' (PANW)  first-quarter results are expected to show that despite weakness last quarter for the group and weak results from Fortinet, the cybersecurity group is getting stronger.

"We see limited signs of spending deterioration from Q2 vs. consensus looking for slowing growth Q3 - framing an easier set up for the best-positioned names, like PFPT and PANW," Morgan Stanley analyst Melissa Gorham wrote in a note to clients.

Analysts compiled by Yahoo! Finance expect the cyber security software company to earn 53 cents a share on $400.2 in revenue.

Pacific Crest Securities analyst Rob Owens wrote that he's bullish on the company's prospects, citing strength in different verticals. "Checks have been strong, particularly in federal, and in our view, product expectations have been reined in," Eyal wrote to clients. "Partnerships and standalone subscriptions should aid results as well. We anticipate a beat and raise."

These three ETFs may benefit if Palo Alto Networks shows good results and guidance is strong.

iShares North American Tech-Multimedia Networking ETF

The iShares North American Tech-Multimedia Networking ETF (IGN)  has Palo Alto Networks make up 9.09% of its $95.3 million portfolio and charges investors a 0.47% expense ratio.

Morgan Stanley's Gorham noted that the company's free cash flow growth should continue throughout the rest of the calendar year, something that's not reflected in the stock. 

Gorham rates Palo Alto shares overweight with a $146 price target.

First Trust Nasdaq Cybersecurity ETF

Palo Alto makes up 6.69% of the First Trust Nasdaq Cybersecurity ETF  (CIBR) , which has $107.5 million in assets under management and has a 0.6% expense ratio.

Oppenheimer analyst Shaul Eyal believes that after checking with clients, Palo Alto's high-end appliances, or software are gaining traction. "SaaS-based subscription services, such as Traps and VM-Series, continue to see solid momentum with both new and existing customers," Eyal wrote to clients. "Americas remain strong while EMEA productivity seems to be improving."

Eyal has a outperform rating and a $184 price target on shares.

PureFunds ISE Cyber Security ETF

The PureFunds ISE Cyber Security ETF (HACK)  has Palo Alto make up 4.65% of its $763.6 million portfolio and charges investors a 0.75% expense ratio.

Pacific Crest's Owens, who rates Palo Alto shares overweight with a $190 price target, believes that strength in the federal sector will drive the first-quarter results.
 
"Channel checks appear positive for FQ1 results, driven by continued momentum in enterprise and large federal deals and aided by joint go-to-market efforts," Eyal wrote to investors. "We anticipate large-deal activity to be in line with the typical FQ1 trend, and growth in customer count to sustain momentum and offer better linearity."

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