Unlike some other players on Wall Street, Palo Alto Networks (PANW) had a pretty solid quarter. Thanks to strength in the Next Gen Security (NGS) product line and stable product revenue growth, the cyber security company blew the consensus estimates right out of the water.
Diving into the details of the fiscal Q4 2020 print, PANW reported product revenue of $306 million, exceeding the Street’s $297 million call. Reflecting a 32% year-over-year gain, billings landed at $1,390 million, partly because of extended contract duration, compared to the $1,204 million consensus estimate. On a quarterly basis, billings growth increased from 18% to 23%. In addition, operating income beat the Street’s forecast.
As for guidance, PANW’s projection for fiscal Q1 2021 billings was in-line with expectations while the revenue and EPS calls were above Wall Street’s forecasts. BTIG’s Gray Powell points out that the company offered “high level insights on growth trends for FY21 that imply absolute dollar revenue and billings above street forecasts and slightly lower than expected operating income for the year.”
Further weighing in on the results, Powell stated, “Admittedly, we would have liked to have seen more upside on product revenue in fiscal Q4 and guidance calling for flat to slightly declining product revenues in F21 likely disappointed bulls. In addition, we were not too excited to see another acquisition announcement.”
Looking at this acquisition, in a deal worth $265 million, PANW purchased Crypsis Group to increase its exposure to the incident response space. “The deal makes sense to supplement PANW’s XDR and SOAR capabilities. But it also marks eighth transaction since Nikesh Arora took over as CEO and brings total M&A to $2.1 billion over the last two years,” Powell commented.
That being said, Prisma Access and CloudGenix reflected key points of strength during the quarter. “… we liked what we saw in fiscal Q4 and think there is a decent level of conservatism in guidance. Ultimately, we see PANW driving towards a higher mix of recurring revs and gaining traction with its cloud based NGS portfolio,” Powell noted.
Bearing this in mind, Powell left a bullish call and $313 price target on the stock. At the five-star analyst’s target, the upside potential amounts to 17%. (To watch Powell’s track record, click here)
In general, other analysts are on the same page. With 22 Buy ratings and 3 Holds issued in the last three months, the word on the Street is that PANW is a Strong Buy. The $297.81 average price target puts the upside potential at 17%. (See Palo Alto stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
This article was originally posted on TipRanks.
