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Can Solid Product Portfolio Aid Palo Alto (PANW) Q1 Earnings?

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Palo Alto Networks Inc. (PANW - Free Report) is slated to release first-quarter fiscal 2019 results on Nov 29.

Notably, the company surpassed the Zacks Consensus Estimate in each of the trailing four reported quarters with average positive surprise of 7.6%.

In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate as well as its guided range. Also, it recorded a year-over-year improvement on both counts.

What to Expect in Q1

For the fiscal first quarter of 2019, Palo Alto anticipates revenues of $625-$635 million, up 25-27% year over year. The Zacks Consensus Estimate is pegged at $631.7 million.

Non-GAAP effective tax rate for the current quarter is projected to be approximately 22%. Non-GAAP earnings per share are expected in the range of $1.04-$1.06. The Zacks Consensus Estimate is pegged at $1.05, indicating a year-over-year increase of 41.9%.

Let’s see how things are shaping up prior to this announcement.                                                                                        

Factors to Consider

Palo Alto is benefiting from the increasing adoption of its next-generation security platforms. The continuous spending on security, backed by a large-scale upgrade in IT infrastructure and transition to cloud, bodes well for the company.

The company’s innovative product portfolio and its constant efforts toward its enhancement are not only helping it reach out to new customers but also opening new avenues for the existing clients.

Further, the company’s advancement in cloud security is evident from more than 6,000 customers using its VM-Series, Aperture, Evident and GlobalProtect cloud service offerings. With Traps, the company now caters to more than 3,000 customers and protects above 5 million endpoints.

Given growth in the company’s cloud offerings, it is gaining much from its subscription services. Strong attached services revenues and non-attached subscriptions are tailwinds for the company.

Additionally, successful sales execution is aiding the company to acquire clients. Increase in the existing customers’ expenditures is contributing to overall growth for the company. In the last reported quarter, the company added nearly 3,000 customers, raising the total count to 54,000.

Furthermore, acquisitions have been one of Palo Alto’s key strategies to strengthen its product portfolio and widen the company’s global reach. The company expects to extend its endpoint detection and response (EDR) capabilities with the buyout of Secdo.

Additionally, the company’s existing cloud partnerships with giants, namely Amazon’s (AMZN - Free Report) Amazon Web Services and Alphabet’s (GOOGL - Free Report) Google Cloud are its positives.

Howewer, competition from several big and small players in the security application market is a concern. Also, there are some established companies like Cisco (CSCO - Free Report) and Juniper in the adjacent markets, further intensifying rivalry in the space.

Palo Alto carries a Zacks Rank #3 but has an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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