Palo Alto Networks Inc. shares surged Wednesday after Wall Street rewarded the cybersecurity company for another beat-and-raise quarter, as analysts said budget crunches among businesses are leading executives to favor larger vendors.
Palo Alto Networks
PANW,
shares rallied as much as 13% to hit an intraday high of $188.79, and were last up more than 12%, on track for their best day since a year ago, when shares rose 13.1%. The move came after the software company raised its outlook for the year once again and forecast better-than-expected operating margins Tuesday afternoon.
Citi Research analyst Fatima Boolani, who has a buy rating and raised her price target to $220 from $195, said there were “no holes to poke” in Palo Alto Network’s “healthy beat” and “touch mixed, but defensibly prudent” outlook, and that the report validated “three interrelated dynamics for cyber” in 2023.
“Budget scrutiny is here, it’s driving consolidation behavior favoring scaled incumbents, and multi-solution-pillar platforms are winning disproportionately,” Boolani said.
Guggenheim analyst John DiFucci, who has a neutral rating, said his concerns about product cycles were dispelled after new workload product reaccelerated against easier comparisons
DiFucci said the outlook was “solid (given the macro),” but noted it introduced a few questions on whether some product revenue from the third quarter will get pushed into the fourth.
Jefferies analyst Joseph Gallo, who has a buy rating and raised his price target to $215 from $195, called it a “rinse & repeat” quarter as annual recurring revenue rose 63% year-over-year and free cash flow margins were raised.
“While macro remains, it’s evident the platform message is resonating w/customers & we view FY23 guidance as prudent, creating an appealing setup,” Gallo said.
From November: Palo Alto Networks one of 2022’s best software stocks after another beat-and-raise quarter
The results follow those of Cloudflare Inc.
NET,
which a few weeks back also forecast better-than-expected results amid a stormy cloud-software climate.
Palo Alto Networks forecast full-year earnings of $3.97 to $4.03 a share on revenue of $6.85 billion to $6.91 billion and billings of $9.1 billion to $9.2 billion for the year, while the Street had forecast $3.42 a share on revenue of $6.89 billion and billings of $9.06 billion for the year.
Palo Alto Networks forecast third-quarter adjusted earnings of 90 cents to 94 cents a share on revenue of $1.7 billion to $1.73 billion and billings of $2.2 billion to $2.25 billion for the third quarter, while analysts had estimated 79 cents a share on revenue of $1.74 billion and billings of $2.23 billion for the third quarter.
Of the 44 analysts who cover Palo Alto Networks, 28 have buy-grade ratings, 14 have hold ratings, and two have sell ratings, along with a price target of $208.07, up from a previous $200.33.
Palo Alto Networks shares are up 18% over the past 12 months. In comparison, the ETFMG Prime Cyber Security ETF
HACK,
is down 11%, the First Trust Nasdaq Cybersecurity ETF
CIBR,
is off 9%, the S&P 500 index
SPX,
down 7%, and the tech-heavy Nasdaq Composite Index
COMP,
is off 14%.
This post was originally published on Market Watch
