Are Analysts Too Optimistic on Palo Alto Networks?

Palo Alto Networks Inc. (NYSE: PANW) reported its fiscal second-quarter financial results after the markets closed on Monday. Even though investors treated this as a fairly dismal report, analysts were not completely sold on the idea. In fact, a few still maintain there is solid upside for this cybersecurity firm despite these recent pullbacks.

24/7 Wall St. has included some brief highlights from the earnings report, as well as what a few analysts are saying about Palo Alto Networks after the fact.

The cybersecurity firm said that it had $1.19 in earnings per share (EPS) and $816.7 million in revenue. This compares with what analysts were calling for: $1.12 in EPS and $843.26 million in revenue. The same period of last year reportedly had $1.51 in EPS and $711.2 million in revenue.

Overall revenues grew 15% year over year. Product revenues decreased 9.2% to $246.5 million, while subscription and support revenues grew 29.7% to $570.2 million.

During the quarter, billings grew 17% year over year to $998.9 million. Deferred revenue increased 27% year over year to $3.2 billion.

Looking ahead to the fiscal third quarter, the company expects to see EPS in the range of $0.96 to $0.98 and revenue between $835 million and $850 million. Analysts are calling for $1.25 in EPS and $873.08 million in revenue for the quarter.

Here’s what analysts had to say:

  • Wedbush maintained its Outperform rating but trimmed its target price to $240 from $275.
  • Mizuho maintained a Buy rating but lowered its price target to $245 from $265.
  • RBC Capital Markets downgraded it to Sector Perform from Outperform and lowered its target to $235 from $280.
  • JPMorgan downgraded it to Neutral from Overweight and cut its target to $235 from $285.
  • Merrill Lynch reiterated its Neutral rating and lowered its price objective to $240 from $265.
  • BMO cut it to a Market Perform rating from Outperform and lowered its target to $220 from $248.
  • Deutsche Bank downgraded it to Hold from Buy and lowered its price target to $210 from $275.

Palo Alto Networks stock traded down 15% to $201.11 on Tuesday, in a 52-week range of $192.17 to $260.63. The consensus price target is $265.23.

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