William Blair Maintains Outperform On Palo Alto Networks Ahead Of 4Q14 Results

In a research note released Monday, William Blair analyst Jonathan Ho maintained an Outperform rating on Palo Alto Netowrks (NYSE:PANW) ahead of the company’s release of its fourth quarter results. No price target was assigned.

Ho wrote, “For Palo Alto Network’s fiscal fourth quarter, we believe the company may report pro forma top- and bottom-line results above the Street consensus of $0.11 per share. We expect the company to deliver another strong set of results, based on continued market share gains, new customer wins, and increasing traction for the company’s WildFire product. Our discussions with resellers and partners suggest the company continues to enjoy clear momentum in gaining share in the transition toward the next-generation firewall market. Combined with a strong security spending environment attributed to the increased cadence of high profile breaches and the continued struggles in legacy firewall vendors, we believe the company will continue to gain market share. Our discussions with resellers suggest few new customers are interested in firewalls that do not have next-generation capabilities and that Palo Alto remains the clear leader in this transition.”

The analyst continued “We believe investors have embraced the company’s settlement agreement with Juniper, removing a significant overhang on the stock. In our view, Palo Alto’s strong April quarterly results again demonstrated the company’s ability to gain market share and win new customers. Nearly all of Palo Alto’s revenue is derived from competitive displacement, suggesting the company continues to enjoy favorable reception in its end-market. Overall, we were also encouraged by the company’s broader product vision and opportunity to pursue a holistic platform solution, which in our view should expand its market opportunity. The stock has been trading about 37.5 times our fiscal 2015 free cash flow estimate of $188.5 million, which we view as a reasonable valuation, based on the prospect for continued strong top-line growth of 46.5% in fiscal year 2014 and 33.4% in 2015, strong free cash flow generation, and investor demand for stocks in the cybersecurity space.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jonathan Ho has a total average return of 0.3% and a 55.6% success rate. Ho is ranked #2422 out of 3273 analysts.

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