2024-02-21 15:51:00
Palo Alto Palo Alto -26.43% Close: 0 Open: 275 High: 275.98 Low: 266.33 Turnover:– Page Quote News Graphs Company Profile Recommendations More articles on the subject: Although it exceeded expectations in its reports, the forecast it provided is disappointing. Apparently the growth potential in the cyber market is not as great as people think right now, and the company also recognizes this.
At the same time, Boffenheimer is still optimistic about the company, and thinks that the latest decline is an opportunity to increase its position in the company, as they present in their review of the company: “Cyber leader Palo Alto Networks (PANW) last night posted results above expectations, with a 19% growth in total revenue, A growth of 16% in billings and a high growth of 50% in the pure cloud activity. At the same time, the forecast for the rest of the fiscal year 2024 was lower than expected, with a slowdown in billings due to the company’s transition to large transactions within an overall platform, a process that evaluates the transaction value” , write in Oppenheimer.
“A miss in the order forecast after a sharp increase in the stock recently led to aggressive selling in the stock at a rate of about 20%. We maintain the Outperform recommendation with a target price of $305 on the stock that is on the “Israelist” recommended list and recommend taking advantage of the weakness by increasing holdings in the stock,” they write Boffenheimer.
“In the second fiscal quarter of 2024 (ended in January), Palo Alto posted revenue of $1.98 billion, an annual growth of 19%, with non-GAAP net income of $1.46 per share, above consensus forecasts of $1.97 billion and $1.30 per share,” Add in Oppenheimer. “The gross profit rate was 78%, an annual increase of 250 bps, while the operating profit rate rose to 28.6%, an annual increase of 580 bps. At the same time, new orders and billings were slightly lower than expected, amounting to 2.35 $1 billion, an annual growth of 16%, slightly below the consensus of $2.36 billion. The RPO order backlog increased to $10.8 billion, including $5.2 billion for the coming year.”
“Next-Gen-Security cloud activity reached an ARR of $3.49 billion, a high growth of 50%, in light of strong momentum in transactions within the cyber platform that includes network security solutions such as NGFW, SD-WAN, SASE, cloud security solutions and solutions for the security of XDR endpoints and AI attacks that may threaten the security of the organizations,” Oppenheimer adds, “the company added 368 new customers with an ARR over $1 million this quarter, including ten customers over $10 million, and benefited from high demand for cyber products in the cloud. At the same time, large transactions within The overall platform leads to longer sales cycles and revenue recognition, thus influencing the rate of growth in new orders.”
Boffenheimer also refers to the forecast given by the company: “Accordingly, Palo Alto’s management lowered the revenue and billings forecast for the fiscal year 2024, with revenue expected in the range of $7.95-8.00 billion (compared to the previous forecast of $8.15-8.20 billion), annual growth of 16% according to the mid-range, along with a slight increase in the non-GAAP net profit forecast to a range of $5.55-5.45 per share, compared to the consensus of $8.19 billion and $5.52 per share. The company once again lowered the forecast regarding the billings to a range of -10.1 $10.2 billion, growth of 10%-11%, compared to the previous forecast of 16% growth. Palo Alto is expected to continue generating strong cash flow, with an FCF forecast of 38%-39% of total revenues, about 1% above the previous forecast, thus The rule of 40 is met, which strengthens the investment thesis in the company’s stock,” writes Boffenheimer.
“We believe that prolonged weakness in billings reflects Palo Alto’s progress to the next stage in its growth strategy, which includes the consolidation of its customers’ purchases across the entire range of cyber solutions and the replacement of competing solutions from niche companies,” write Oppenheimer. “This strategy should continue to drive Palo Alto’s growth at a double-digit rate, while improving profitability and cash flow, and strengthening Palo Alto’s competitive position in the cyber market.
We maintain an Outperform recommendation on PANW stock while slightly lowering the price target from $310 to $305, based on a sales multiple of 11 and an FCF multiple of 30 for the fiscal 2025 forecast, similar to the cyber industry average despite Palo Alto’s leading market position and profitability profile Unusual. The PANW share is on the ‘Israelist’ list.”
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