PANW Stock Hits All-Time High As Palo Alto Issues Guidance Above Estimates - Investor's Business Daily

Cybersecurity firm Palo Alto Networks' (PANW) acquisition spree aimed at building a broad cloud-based platform seems to be gaining traction based on its fiscal 2022 outlook, analysts say. PANW stock popped to an all-time high on Tuesday following its July quarter earnings beat.

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"Demand for cloud and SASE (secure access service edge) remained robust, with the company seeing large deal activity accelerate based on cross-selling multiple products as a platform," William Blair analyst Jonathan Ho said in a report to clients.

PANW stock popped 18.6% to near 442 in midday action on the stock market today. That topped its earlier all-time high of 406.92 set on Aug. 5. With today's gain, PANW stock is extended.

The company reported fiscal fourth-quarter earnings after the market close on  Monday. For fiscal 2022, Palo Alto forecast revenue in a range of $5.27 billion to $5.32 billion and earnings in a range of $7.15 to $7.25 a share. Analysts had projected revenue of $5 billion and earnings of $7.09 a share.

Including acquisitions, Palo Alto earnings for the July quarter were $1.60 per adjusted share, up 8% from the year-earlier period. Revenue rose 28% to $1.2 billion, the company said. Analysts expected earnings of $1.43 a share on sales of $1.17 billion.

PANW Stock: Double-Digital Product Revenue Growth

"Demand was driven by notable strength in large customer transactions — with strategic commitments across Strata, Prisma, and Cortex product platforms — highlighted by the largest follow-on Cortex deal at approximately $10 million and $40 million in Prisma Cloud commitments from PANW's three largest customers, including a $20 million deal," said Credit Suisse analyst Sami Badri in a report.

Further, fiscal Q4 billings jumped 34% to $1.86 billion, blowing past estimates for 23% growth.

"The double-digit product revenue growth was notable given it was the first time we have seen double-digit growth since the fourth quarter of 2019," added Ho.

For the current quarter ending in October, Palo Alto expects earnings in a range of $1.55 to $1.58 per share, with revenue of $1.2 billion. Analysts had predicted earnings of $1.60 a share on revenue of $1.15 billion.

Palo Alto forecast billings of $1.3 billion compared with analyst estimates of $1.25 billion.

"PANW stock has the opportunity to gain wallet share by consolidating security spend, enabled by the strength of its broad portfolio," BMO Capital Markets analyst Keith Bachman said in his note to clients. "Further, we think investors will appreciate a slowdown in M&A in fiscal 2022, which presumably will help margins."

Company's Acquisition Spree

Meanwhile, the company has spent over $3 billion making 10 acquisitions over the past three years. With roots in the "firewall" network security market, Palo Alto aims to build a broad cloud-based security platform.

Meanwhile, Palo Alto holds an analyst day on Sept. 13. PANW stock analysts expect the company to discuss cybersecurity trends and its cloud platform.

Heading into the Palo Alto earnings report, management's outlook on profit margins had been a concern.

"While Palo did guide below the street on margins, we'd consider the outcome not as bad as the worst fears we heard from investors," Raymond James analyst Adam Tindle said in a note.

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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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