Oppenheimer Praises Palo Alto Networks Inc (PANW) Despite Weak Guidance

Palo Alto Networks Inc (NYSE:PANW) just posted a financial fourth-quarter revenue beat, bringing in revenue of $400.8 million that topped the Street’s estimate of $389.8 million, and EPS that matched the Street of ($0.50). Yet, the cyber-security firm’s weaker-than-expected guidance has ultimately sent shares tumbling almost 9%.

Despite guidance revealed as at least 3 cents below past estimates, between $0.51 and $0.53 a share, Oppenheimer top analyst Shaul Eyal reiterates an Outperform rating on shares of PANW with a $177 price target, which represents a nearly 34% increase from where the stock is currently trading.

PANW outclassed the Street for the quarter with record billings of $571.7 million, a marked 45.2% jump, compared to consensus of $559.5 million, which Eyal attributes to a bolstered subscription services segment. Product revenue reached $191.1 million, a 24.1% year-over-year increase, and Service revenue hit $202.4 million, a growth of 61.5%. Management expects subscription revenues to rise 50% year-over-year in the fiscal year of 2017.

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Additionally, PANW guided for F1Q17 revenue of $396 to $402 million. However, Eyal cuts F1Q17 revenue estimates from $411 million to $399 million, and EPS from $0.56 to $0.52. For the fiscal year of 2017, PANW guided EPS of $2.75 to $2.80, and the analyst raises his EPS estimate from $2.53 to $2.78. However, Eyal lowers his revenue projection from $1.83 billion to $1.82 billion. Meanwhile, Eyal introduces forecasts for the fiscal year of 2018, with revenue expected of $2.35 billion and EPS of $3.76.

Eyal concludes, “While the law of big numbers is clearly impacting PANW’s growth, we are still impressed with record billings growth of +45.2% YoY as the company gradually transitions toward a more subscription-driven model.”

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Shaul Eval is ranked #49 out of 4,129 analysts. Eyal upholds a 63% success rate and yields 11.4% in his annual returns. When recommending PANW, Eyal gains 19.0% in average profits on the stock.

TipRanks analytics exhibit PANW as a Strong Buy. Based on 20 analysts polled in the last 3 months, 16 rate a Buy on PANW, while 4 maintain a Hold. The consensus price target stands at $177.17, marking a 34% upside from where the shares last closed.

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