Are Analysts Too Optimistic on Palo Alto Networks?

By Chris Lange Published Feb 25, 10:55AM EST

Are Analysts Too Optimistic on Palo Alto Networks? — © Wikimedia Commons

Palo Alto Networks Inc. (NYSE: PANW | PANW Price Prediction) 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.

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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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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.