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Why Shares of Palo Alto Networks Jumped 13% in Last 15 Days?
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It has been approximately 15 days since Palo Alto Networks Inc. (PANW - Free Report) reported third-quarter fiscal 2017 results. Following the release, the stock has been on the rise.
To some investors, picking the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors’ radar. While better-than-expected results make the stock a good pick, lower-than-expected results dampen investors’ spirit. So, the period following earnings releases is often marked by high market activity.
Shares Marching Higher
Palo Alto Networks reported its quarterly numbers on May 31 after the market closed, following which its shares have gained approximately 13%, so far. Notably, the stock has returned approximately 14.4% in the last three months, outperforming the Zacks categorized IT Security industry’s gain of 9.7%.
The company reported decent fiscal third-quarter results, wherein its revenues and net income, both, improved significantly. Palo Alto Networks’ revenues of $431.8 million surged 24.9% year over year and surpassed the Zacks Consensus Estimate of $413 million. Quarterly revenues came above the guided range of $406–$416 million, primarily due to new customer wins. Non-GAAP net income was $57.1 million compared with $42.3 million reported last year.
Furthermore, the company provided encouraging revenue guidance for fourth-quarter fiscal 2017. For the fiscal fourth quarter, Palo Alto Networks expects revenues in the range of $481–$491 million, up 20–23% year over year. The Zacks Consensus Estimate, at that time, was pegged at $484.4 million. The company projects non-GAAP earnings per share within 78–80 cents.
A strong quarterly result, along with an encouraging fiscal fourth quarter guidance helped in boosting investors’ confidence about the company’s future prospects.
Upward Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for fourth quarter and fiscal 2017 witnessed upward revisions. For the fiscal fourth quarter, the Zacks Consensus Estimate is currently pegged at loss of 20 cents, which is lower than loss of 27 cents projected 30 days ago. Similarly, the Zacks Consensus Estimate for fiscal 2017 is currently pegged at loss of $1.11 compared with loss of $1.26 projected 30 days ago.
Palo Alto Networks is gaining customer accounts and increasing penetration of existing customers, thereby driving revenue growth. During the fiscal third quarter, the company added over 2,000 customers, bringing the total to approximately 39,500 worldwide, including over 86 of the Fortune 100 and more than 60% of the Global 2,000.
It is to be noted that in each of the last 21 quarters, Palo Alto has added at least 1,000 customers. The vast customer base presents the company an opportunity to upsell products within its installed user base. Any product revamp brings in additional dollars as enterprises attempt to keep their threat-management infrastructure updated. These factors, in turn, support the company’s top line.
Revenue growth seems to be steady, aided by strength across all its geographical regions and business segments. Customer wins, along with expansion of the company’s existing customer base are other positives. We believe that the company’s product refreshes and acquisition synergies will bolster revenues, moving ahead.
Given that the company’s long-term earnings per share growth rate is 24.6% and has a Growth Style Score of 'B', we believe that the stock still has much upside potential. Currently, Palo Alto Networks carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Applied Optoelectronics Inc. (AAOI - Free Report) , Fortinet Inc. (FTNT - Free Report) and Guidance Software Inc. . While Applied Optoelectronics sports a Zacks Rank #1 (Strong Buy), Fortinet and Guidance Software carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term expected earnings per share growth rates for Applied Optoelectronics, Fortinet and Guidance Software are 20.0%, 20.6% and 25.0%, respectively.
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By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early.
Image: Bigstock
Why Shares of Palo Alto Networks Jumped 13% in Last 15 Days?
It has been approximately 15 days since Palo Alto Networks Inc. (PANW - Free Report) reported third-quarter fiscal 2017 results. Following the release, the stock has been on the rise.
To some investors, picking the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors’ radar. While better-than-expected results make the stock a good pick, lower-than-expected results dampen investors’ spirit. So, the period following earnings releases is often marked by high market activity.
Shares Marching Higher
Palo Alto Networks reported its quarterly numbers on May 31 after the market closed, following which its shares have gained approximately 13%, so far. Notably, the stock has returned approximately 14.4% in the last three months, outperforming the Zacks categorized IT Security industry’s gain of 9.7%.
The company reported decent fiscal third-quarter results, wherein its revenues and net income, both, improved significantly. Palo Alto Networks’ revenues of $431.8 million surged 24.9% year over year and surpassed the Zacks Consensus Estimate of $413 million. Quarterly revenues came above the guided range of $406–$416 million, primarily due to new customer wins. Non-GAAP net income was $57.1 million compared with $42.3 million reported last year.
Furthermore, the company provided encouraging revenue guidance for fourth-quarter fiscal 2017. For the fiscal fourth quarter, Palo Alto Networks expects revenues in the range of $481–$491 million, up 20–23% year over year. The Zacks Consensus Estimate, at that time, was pegged at $484.4 million. The company projects non-GAAP earnings per share within 78–80 cents.
A strong quarterly result, along with an encouraging fiscal fourth quarter guidance helped in boosting investors’ confidence about the company’s future prospects.
Upward Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for fourth quarter and fiscal 2017 witnessed upward revisions. For the fiscal fourth quarter, the Zacks Consensus Estimate is currently pegged at loss of 20 cents, which is lower than loss of 27 cents projected 30 days ago. Similarly, the Zacks Consensus Estimate for fiscal 2017 is currently pegged at loss of $1.11 compared with loss of $1.26 projected 30 days ago.
Palo Alto Networks, Inc. Price
Palo Alto Networks, Inc. Price | Palo Alto Networks, Inc. Quote
Bottom Line
Palo Alto Networks is gaining customer accounts and increasing penetration of existing customers, thereby driving revenue growth. During the fiscal third quarter, the company added over 2,000 customers, bringing the total to approximately 39,500 worldwide, including over 86 of the Fortune 100 and more than 60% of the Global 2,000.
It is to be noted that in each of the last 21 quarters, Palo Alto has added at least 1,000 customers. The vast customer base presents the company an opportunity to upsell products within its installed user base. Any product revamp brings in additional dollars as enterprises attempt to keep their threat-management infrastructure updated. These factors, in turn, support the company’s top line.
Revenue growth seems to be steady, aided by strength across all its geographical regions and business segments. Customer wins, along with expansion of the company’s existing customer base are other positives. We believe that the company’s product refreshes and acquisition synergies will bolster revenues, moving ahead.
Given that the company’s long-term earnings per share growth rate is 24.6% and has a Growth Style Score of 'B', we believe that the stock still has much upside potential. Currently, Palo Alto Networks carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Applied Optoelectronics Inc. (AAOI - Free Report) , Fortinet Inc. (FTNT - Free Report) and Guidance Software Inc. . While Applied Optoelectronics sports a Zacks Rank #1 (Strong Buy), Fortinet and Guidance Software carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term expected earnings per share growth rates for Applied Optoelectronics, Fortinet and Guidance Software are 20.0%, 20.6% and 25.0%, respectively.
3 Stocks to Ride a 588% Revenue Explosion
At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold...
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early.
See Zacks' Top 3 Stocks to Ride This Space >>