Stock Update (NYSEARCA:PANW): Palo Alto Networks Inc Reports Fiscal First Quarter 2017 Financial Results

Palo Alto Networks Inc (NYSE:PANW) announced financial results for its fiscal first quarter 2017 ended October 31, 2016.

Total revenue for the fiscal first quarter 2017 grew 34 percent year over year to $398.1 million, compared with total revenue of $297.2 million for the fiscal first quarter 2016. GAAP net loss for the fiscal first quarter 2017 was $61.8 million, or $0.69 per diluted share, compared with GAAP net loss of $39.9 million, or $0.47per diluted share, for the fiscal first quarter 2016.

Non-GAAP net income for the fiscal first quarter 2017 was $51.2 million, or $0.55 per diluted share, compared with non-GAAP net income of $30.8 million, or $0.34 per diluted share, for the fiscal first quarter 2016. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

“Our first quarter 2017 results underscore that our Next-Generation Security Platform uniquely solves customers’ most complex security challenges,” said Mark McLaughlin, chief executive officer of Palo Alto Networks. “Our platform’s ability to provide high degrees of prevention, automation, leverage and consistent security, regardless of wherever data may be, is becoming increasingly important in the face of today’s important macro technology changes. As a result, customers and prospects globally are adopting our platform at high rates.”

“In the first quarter fiscal 2017, we added well over 1,500 new customers and saw broad adoption of our Next-Generation Security Platform by our existing customer base. We are now privileged to serve more than 35,500 customers worldwide,” commented Steffan Tomlinson, chief financial officer of Palo Alto Networks. “The power of our hybrid-SaaS model was also evident as we continued to grow multiples of our total addressable market at scale, resulting in record quarterly deferred revenue, cash flow from operations of $203.3 million, and free cash flow of $182.4 million.”

Recent Highlights

  • Teamed with leading Service Providers in APAC – We recently signed agreements with leading service providers in APAC, helping partners reach new revenue sources. Singapore Telecommunications Ltd. (Singtel) is offering its new Managed Advanced Threat Prevention Service, a unique managed security service that harnesses the expertise of Singtel Managed Security Service and the technology of Palo Alto Networks Next-Generation Security Platform, including AutoFocus™ contextual threat intelligence, to protect large enterprise organizations against sophisticated cyberthreats. Meanwhile M1 Limited(M1) is offering Palo Alto Networks Next-Generation Firewall as part of its Cyber Security Solution to enterprise customers, delivering an industry-leading, carrier-grade, cloud-based “internet clean pipe” solution to protect the enterprise’s network and architecture – without sacrificing effectiveness or performance.
  • Verified that Traps™ helps customers meet HIPAA and PCI cybersecurity compliance requirements – Our Traps™ advanced endpoint protection offering received independent verification from Coalfire Systems, a respected leader in cyber risk management and compliance services and a Qualified Security Assessor, that it meets specific cybersecurity requirements outlined by both Health Insurance Portability and Accountability Act (HIPAA) and the Payment Card Industry (PCI) Data Security Standard, concluding that organizations in the healthcare and financial sectors can replace legacy antivirus endpoint products with Traps™ while remaining compliant with federal law and industry standards.
  • Continued cyber education efforts with new cybersecurity guides for C-suites and boards – In conjunction with industry experts, we published regionally tailored guides in both France and Australia designed to provide executives and directors practical advice on a range of cybersecurity issues, including compliance and breach avoidance, prevention and response.
  • Appointed Mary Pat McCarthy to the board of directors – Ms. McCarthy joined our board and audit committee and brings more than 34 years of experience in financial and accounting matters. Ms. McCarthy has served in numerous senior leadership positions at KPMG LLP, most recently as vice chair, and on various other boards and audit committees.

Financial Outlook

Palo Alto Networks provides guidance based on current market conditions and expectations.

For the fiscal second quarter 2017, we expect:

  • Total revenue in the range of $426 to $432 million, representing year-over-year growth between 27 percent and 29 percent.
  • Diluted non-GAAP net income per share in the range of $0.61 to $0.63 using 93.5 to 95.5 million shares.

Guidance for non-GAAP financial measures excludes share-based compensation related charges, including share-based payroll tax expense, acquisition related costs, amortization expense of acquired intangible assets, litigation related charges including legal settlements, non-cash interest expense related to our convertible senior notes, foreign currency gains (losses) and income and other tax effects associated with these items, and certain non-recurring expenses. We have not reconciled diluted non-GAAP net income per share guidance to GAAP net income (loss) per diluted share because we do not provide guidance on GAAP net income (loss) and would not be able to present the various reconciling cash and non-cash items between GAAP net income (loss) and non-GAAP net income (loss), including share-based compensation expense, without unreasonable efforts. Share-based compensation expense is impacted by the company’s future hiring and retention needs and, to a lesser extent, the future fair market value of the company’s common stock, all of which is difficult to predict and subject to constant change. While the actual amounts of such reconciling items will have a significant impact on the company’s GAAP net income (loss) per diluted share, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort. (Original Source)

Shares of Palo Alto are currently falling nearly 13% in after-hours trading Monday. PANW has a 1-year high of $194.73 and a 1-year low of $111.09. The stock’s 50-day moving average is $154.91 and its 200-day moving average is $137.66.

On the ratings front, PANW has been the subject of a number of recent research reports. In a report released today, UBS analyst Brent Thill reiterated a Buy rating on PANW, with a price target of $165, which represents a slight upside potential from current levels. Separately, on November 18, Barclays’ Saket Kalia reiterated a Buy rating on the stock and has a price target of $200.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brent Thill and Saket Kalia have a yearly average return of 10.4% and 6.1% respectively. Thill has a success rate of 68% and is ranked #76 out of 4227 analysts, while Kalia has a success rate of 51% and is ranked #984.

Overall, 2 research analysts have assigned a Hold rating and 20 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $183.36 which is 12.7% above where the stock opened today.

Palo Alto Networks, Inc. engages in the provision of network security solutions. It offers network security functions which include threat protection, firewall, intrusion detection system, intrusion prevention system and uniform resource locator filtering. 

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