Palo Alto Networks Inc (PANW) Draws Price Target Boost Following Standout FQ1:18 Performance

Oppenheimer's Shaul Eyal now sees 17% upside potential for PANW on back of a powerhouse earnings outclass and full-year guidance raise for fiscal 2018.


Palo Alto Networks Inc (NYSE:PANW) shares are flying almost 8% in pre-market trading after the security software giant revealed what Oppenheimer analyst Shaul Eyal is cheering as a triumphant and “robust” first fiscal quarter performance.

In reaction to the strength of the print that beat out Street-wide expectations from revenues to EPS to billions to cash from operations (CFF), the analyst maintains an Outperform rating on PANW stock while lifting the price target from $173 to $180, which represents a just under 17% increase from current levels. (To watch Eyal’s track record, click here)

For the first fiscal quarter, the giant brought to the table an outclass of $0.74 against consensus of $0.68 riding a 27% year-over-year surge in revenue to $505.5 million that likewise outperformed the Street’s $488.8 million. Eyal attributes better productivity coupled with new product sales as “positively” impacting the quarter. Meanwhile, PANW’s operating margin of 19% rose above the Street’s 18.8% with CFFO of $274 million topping consensus of $209.7 million.

The giant set its outlook for the second fiscal quarter for revenue between $518 and $528 million and with EPS between $0.78 and $0.80. In comparison, the analyst is forecasting revenue of $523.5 million and $0.79 in EPS. On top of the first fiscal quarter beat, the tech player likewise excited the Street with a full year raise in its guide for fiscal 2018, now calling for revenue of $2,145 to $2,185 million and EPS of $3.35 to $3.41. On the heels of the raise, the analyst is adjusting his revenue from $2.147 billion to $2,169 million for fiscal 2018 and taking EPS from $3.29 to $3.39. For fiscal 2019, the analyst stands by his projections of $2.594 million in revenue and $4.37 in EPS.

Eyal writes, “PANW’s robust F1Q performance was driven by new product sales and productivity improvements as highlighted by new customer acquisition metrics (+2,500 customers in the quarter). In conjunction with results, PANW is promoting Kathy Bonanno to its open CFO position, whereby given her experience and familiarity with PANW since 2014, we expect a smooth transition. Positively, EMEA grew +35% YoY which, in our view, could be attributed to the development of stronger relationships with local distributors. We’re encouraged by PANW’s upward momentum that negates any uncertainty regarding the broader network security landscape.”

The “bottom line” for the analyst is a bullish one: “We believe the reception of PANW’s platform coupled with strong execution is helping the company translate demand into consistent positive results,” surmises Eyal.

Wall Street is slanted towards the bulls on this tech mover and shaker, with TipRanks analytics indicating PANW as a Buy. Out of 23 analysts polled by TipRanks in the last 3 months, 17 are bullish on Palo Alto Networks stock, 5 remain sidelined, while 1 is bearish on the stock. With a return potential of nearly 17%, the stock’s consensus target price stands at $166.55.  

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