Shares of cybersecurity solutions provider Palo Alto Networks, Inc. (PANW) have surged 86.1% over the past 12 months. Recently, PANW delivered a robust set of first-quarter results with its top-line growing 32% over the previous year.
The top-line growth was driven by a double-digit surge in product revenue, coupled with higher subscription, and support revenue. Additionally, billings during the quarter increased 28% over the prior year.
With these developments in mind, let us take a look at the changes in PANW’s key risk factors that investors should know.
According to the TipRanks Risk Factors tool, PANW’s top two risk categories are Finance & Corporate and Tech & Innovation, contributing 37% and 17% to the total 54 risks identified, respectively. In its recent quarterly report, the company has changed three key risk factors while doing away with one.
Under the Finance & Corporate risk category, PANW highlighted that its strategy for growth hinges partly on achieving higher product sales, services, subscriptions, and offerings to new and existing medium and large enterprise end customers. If PANW is not able to successfully execute its strategy, then its results may suffer.
The next two risks fall under the Production risk category. Inventory management is a critical component for PANW and the supply management of its products and product components is complex. Any insufficiency in supply and inventory could lead to lost sales opportunities for PANW or a delay in revenue. Meanwhile, excess inventory levels could harm the company’s gross margins.
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Furthermore, some key components in PANW’s products come from limited sources, which exposes the company to supply shortage or supply change risks. Factors such as the current COVID-19 pandemic and the recent global semiconductor shortage have led to delays in the company’s scheduled product deliveries to end customers. Such events could lead to a loss of sales and end customers.
Lastly, PANW has removed a risk factor under the Finance & Corporate risk category. PANW noted that the requirements of being a public company could stretch its resources, divert the attention of the company’s top brass, and impact its ability to attract and retain qualified board members.
Compared to a sector average of 40%, PANW’s Finance & Corporate risk factor is at 37%.
Wall Street’s Take
On November 23, Argus Research analyst Joseph Bonner reiterated a Buy rating on the stock and increased the price target to $620 from $530.
Consensus on the Street is a Strong Buy based on 25 Buys, 3 Holds, and 1 Sell. The average Palo Alto Networks price target of $595 implies a potential upside of 8.2% for the stock.