Shares of Palo Alto Networks Inc (NASDAQ: PANW) dipped in early trading on Tuesday, although the company reported upbeat revenues and earnings for its fiscal third quarter.
The results came amid an exciting earnings season. Here are some key analyst takeaways.
- RBC Capital Markets analyst Matthew Hedberg reiterated an Outperform rating, while reducing the price target from $365 to $360.
- BMO Capital Markets analyst Keith Bachman reaffirmed an Outperform rating, while raising the price target from $327 to $334.
- Goldman Sachs analyst Gabriela Borges maintained a Buy rating and price target of $310.
- Wedbush analyst Daniel Ives reiterated an Outperform rating and price target of $375.
- Rosenblatt analyst Catharine Trebnick reaffirmed a Neutral rating and price target of $300.
- Stifel analyst Adam Borg maintained a Buy rating and price target of $300.
- Needham analyst Matt Dezort reiterated a Buy rating and price target of $345.
- JMP Securities analyst Trevor Walsh reaffirmed a Market Outperform rating and price target of $380.
- Truist Securities analyst Joel Fishbein maintained a Buy rating and price target of $350.
- Oppenheimer analyst Ittai Kidron reiterated an Outperform rating and price target of $330.
The company appears "well-positioned to consolidate security spend and to maintain above-peer growth," the analyst wrote. "Management noted strong bookings and backlog growth as well as stable cybersecurity demand trends provided the confidence to raise the midpoint of FY/24 guidance," he further stated.
BMO Capital Markets: Investors had been expecting Palo Alto Networks to deliver a beat on billings, Bachman said. He added, however, that the company was tracking in-line with fiscal 2025 estimates.
"We expect greater deferred payments to continue to pressure billings for the next several quarters, or at least until PANW starts to lap it's consolidation initiative in the January FY25 quarter," the analyst wrote. Palo Alto Networks' recent deal with IBM (NYSE: IBM) "is a win for both parties," he added.
Goldman Sachs: While Palo Alto Networks reported its quarterly billings in-line with expectations, its revenue and earnings beat the consensus by 1% and 5%, respectively, Borges said in a note. The company indicated that the demand environment was stable and that the pipeline build is strong, she added.
"While billings will continue to be impacted by duration, Palo Alto pointed to reacceleration in RPO (remaining performance obligations) growth, from 22% to 23% (albeit on 4 pt easier compares)," the analyst wrote. The pressure on the stock "likely reflects elevated expectations into the print given a ~$150mn deal that had been discussed in checks and the potential for Federal to recover," she further stated.
Wedbush: Palo Alto Networks' platformization strategy is in progress and this was a "transition growth quarter," which could lay the foundation for "a reaccelerating growth story into 2025," Ives said. Total revenues came in slightly above expectations, with RPO growing by 23% year-on-year to $11.3 billion, which "more closely reflects performance in the business through this transition," he added.
Management guided to billings between $10.13 billion and $10.18 billion for the full year, which takes the midpoint higher by $50 million versus the previous guidance, the analyst stated. The company also raised its revenue and earnings guidance to $7.99 billion - $8.01 billion, from $7.95 billion - $8.00 billion, and to $5.56 - $5.58 per share, from $5.45 - $5.55 per share. "We note longer term that the company anticipates reaching $15.0 billion NGS ARR by 2030 as the company doubles down on its platformization and consolidation strategy with a large pipeline heading into FY4Q24," he further wrote.
Rosenblatt Securities: The quarterly results indicated "positive momentum," including a 40% sequential increase in platformization deals, 50% year-on-year growth in Next-Generation Security (NGS) annual recurring revenue (ARR), 23% year-on-year RPO growth, "a record $150M TCV deal, and an IBM partnership," Trebnick said.
She added, however, that the stock lost 8% in aftermarket trading as the company's "billings performance and outlook missed investor expectations." Billings grew by 3%, falling short of the Street's 4% estimate, the analyst stated.
Stifel: Palo Alto's results were broadly in-line with expectations, while billings growth of 3% year-on-year missed "heightened buy-side expectations of mid-to-high single-digit growth," Borg said.
"Given expectations for more upside coupled with the run in shares (Palo shares were up 14% QTD vs. the S&P 500 up 1%), we are not surprised to see the stock give back some recent gains," the analyst wrote. The fiscal fourth quarter is likely to be a more important one, given that it has been Palo Alto's seasonally strongest quarter and the company providing an initial guidance for fiscal 2025 at that time, "which Palo has previously talked down given its new strategy," he added.
Needham: Palo Alto Networks reported a "solid" quarter, with its platformization strategy "unfolding as planned," Dezort said. Both RPO and bookings inflected higher in the quarter, which "should give investors confidence in the strategy progress," he added.
Demand is robust and the company's pipeline "sounds strong heading into FY4Q," the analyst wrote. He further stated, however, that the impact of "deferred payment preferences is still slightly outpacing expectations and weighing on the outlook."
JMP Securities: Palo Alto Networks reported non-GAAP earnings of $1.32 per share, beating consensus of $1.25 per share, on revenues of $1.98 billion, higher than the Street's $1.97 billion estimate, Walsh said. These results were "supported by 47% NGS ARR growth and the sixth consecutive quarter of SASE growth greater than 50%," he added.
The company's performance since the "strategic pivot" to platformization indicates that the management team is "executing and delivering on both its strategy and prior guidance frameworks," the analyst stated.
Truist Securities: Palo Alto Networks reported "decent" quarterly results, Fishbein said. "Although billings was lighter, we note strength in its ARR, up 47% YoY, as well as acceleration QoQ in RPO, which the company notes is more representative of its business," he added.
The company raised the ARR guidance for the full year and maintained its profitability outlook, "showing its leverage despite the strategy shift," the analyst wrote. "Overall, we believe the business is still on track for its LT goal of $15B in ARR by FY30," he further stated.
Oppenheimer: Palo Alto Networks delivered a "modest beat," although NGS ARR growth was "impressive," Kidron said.
"However, the shift toward platform deals weighed on revenue/billings growth expectations, with the company guiding 4QFY24 only in line with consensus (after cutting guidance last Q) and with the expected headwind to remain for the next 12-18 months," he added.
PANW Price Action: Shares of Palo Alto Networks had declined by 4.03% to $310.72 at the time of publication on Tuesday.