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Category: Stock Market and Palo Alto
Date: 26 November 2019 Stock Price: $250.28 We take a look at the 1st quarter earnings for their 2020 fiscal year of Palo Alto the cybersecurity and cloud provision company. The company cut their fiscal guidance for the year ahead.
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About Palo Alto
Palo Alto Networks, the global cybersecurity leader, is shaping the cloud-centric future with technology that is transforming the way people and organizations operate. Our mission is to be the cybersecurity partner of choice, protecting our digital way of life. We help address the world's greatest security challenges with continuous innovation that seizes the latest breakthroughs in artificial intelligence, analytics, automation, and orchestration. By delivering an integrated platform and empowering a growing ecosystem of partners, we are at the forefront of protecting tens of thousands of organizations across clouds, networks, and mobile devices. Our vision is a world where each day is safer and more secure than the one before. For more information visit www.paloaltonetworks.com.
Overview of Palo Alto's 1st quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Total revenues: $771.9 million (up from $656 million from the same quarter of the previous year)
- Total revenue increased by 17.7% over the last 12 months
- Total cost of revenue: $554.2 million (up from $472.5 million for the same quarter of the previous year)
- Total cost of revenue of increased by 17.3% over the last 12 months
- Net loss: -$59.6 million (down from -$38.3 million for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 96.6 million (up from 93.8 million for the same quarter of the previous year)
- Diluted net income per share: -$0.62 (down from -$0.41 for the same quarter of the previous year)
- Cash and cash equivalents: $1.263 billion
- Cash and cash equivalents per share: $13.07
- Cash and cash equivalents makes up 5.2% of Palo Alto's current market capital
- Cash and cash equivalents makes up 18.5% of Palo Alto's total assets
- Accounts receivable: $499 million
- Accounts receivable makes up 7.3% of the group's total assets
- Total shareholders' equity of Palo Alto : $1.516 billion
- Shareholders' equity per share: $15.69
- Palo Alto is trading at 15.9 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
Palo Alto's management commentary on their 1st quarter 2020 earnings report
SANTA CLARA, Calif., Nov. 25, 2019 /PRNewswire/ -- Palo Alto Networks (NYSE: PANW), the global cybersecurity leader, announced today financial results for its fiscal first quarter 2020, ended October 31, 2019.
Total revenue for the fiscal first quarter 2020 grew 18 percent year over year to $771.9 million, compared with total revenue of $656.0 million for the fiscal first quarter 2019. GAAP net loss for the fiscal first quarter 2020 was $59.6 million, or $0.62 per diluted share, compared with GAAP net loss of $38.3 million, or $0.41 per diluted share, for the fiscal first quarter 2019.
Non-GAAP net income for the fiscal first quarter 2020 was $104.8 million, or $1.05 per diluted share, compared with non-GAAP net income of $115.4 million, or $1.17 per diluted share, for the fiscal first quarter 2019. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
"Palo Alto Networks' multi-platform approach to security is clearly resonating with our customers. Our Next-Gen Security offerings performed extremely well in our first fiscal quarter, bolstering our confidence in our long-term prospects for Prisma and Cortex," said Nikesh Arora, chairman and CEO of Palo Alto Networks. "At our recent Ignite conference, we introduced significant product enhancements, including Cortex XDR 2.0, SD-WAN and DLP capabilities for Prisma Access and the integration of Twistlock and PureSec into Prisma Cloud, that should sustain this momentum. Additionally, we expect our proposed acquisition of Aporeto, announced today, will further extend our leadership in cloud security."
Total revenue for the fiscal first quarter 2020 grew 18 percent year over year to $771.9 million, compared with total revenue of $656.0 million for the fiscal first quarter 2019. GAAP net loss for the fiscal first quarter 2020 was $59.6 million, or $0.62 per diluted share, compared with GAAP net loss of $38.3 million, or $0.41 per diluted share, for the fiscal first quarter 2019.
Non-GAAP net income for the fiscal first quarter 2020 was $104.8 million, or $1.05 per diluted share, compared with non-GAAP net income of $115.4 million, or $1.17 per diluted share, for the fiscal first quarter 2019. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
"Palo Alto Networks' multi-platform approach to security is clearly resonating with our customers. Our Next-Gen Security offerings performed extremely well in our first fiscal quarter, bolstering our confidence in our long-term prospects for Prisma and Cortex," said Nikesh Arora, chairman and CEO of Palo Alto Networks. "At our recent Ignite conference, we introduced significant product enhancements, including Cortex XDR 2.0, SD-WAN and DLP capabilities for Prisma Access and the integration of Twistlock and PureSec into Prisma Cloud, that should sustain this momentum. Additionally, we expect our proposed acquisition of Aporeto, announced today, will further extend our leadership in cloud security."
Financial Outlook
Palo Alto Networks provides guidance based on current market conditions and expectations.
For the fiscal second quarter 2020, we expect:
Palo Alto Networks provides guidance based on current market conditions and expectations.
For the fiscal second quarter 2020, we expect:
- Total revenue in the range of $838 to $848 million, representing year-over-year growth between 18 percent and 19 percent.
- Total billings in the range of $985 million to $1.0 billion, representing year-over-year growth between 16 percent and 17 percent.
- Diluted non-GAAP net income per share in the range of $1.11 to $1.13, which incorporates net expenses related to the proposed acquisition of Aporeto, using 100 to 102 million shares.
- Total revenue in the range of $3.44 to $3.48 billion, representing year-over-year growth between 19 percent and 20 percent.
- Total billings in the range of $4.105 to $4.165 billion, representing year-over-year growth between 18 percent and 19 percent.
- Diluted non-GAAP net income per share in the range of $4.90 to $5.00, which incorporates net expenses related to the proposed acquisition of Aporeto, using 102 to 104 million shares.
- Adjusted free cash flow margin of approximately 29 percent, which includes net expenses and acquisition transaction costs attributable to the proposed acquisition of Aporeto and one-time items, such as cash flow associated with the additional investment in our headquarters in Santa Clara.
Palo Alto (NYSE: PANW) stock price history
The image below shows the stock price of Palo Alto (NYSE: PANW) over the last 5 years. And its been a pretty good time for Palo Alto stockholders over the last 5 years. 5 years ago the stock was trading at $123 and its currently trading at $250.28. That's a very strong return of 103.5% provided to Palo Alto stockholders over the last 5 years Palo Alto is trading at very close to its 52 week high of $260.63 than it is to its 52 week low, which to us is a clear indication that the short term sentiment and momentum of Palo Alto stock is very positive.
Recent coverage of Palo Alto
The extract below covers the latest earnings report of Palo Alto as obtained from TheStreet.com
Shares of cyber security provider Palo Alto Networks (PANW - Get Report) fell sharply after the company posted revenue and earnings that beat estimates, but disappointing guidance. The stock fell 7.92% to $230.45 a share after-hours on Monday, after having gained 1.36% in regular hours.
Adjusted earnings per share came in at $1.05 for its quarter ended October, beating analysts estimates of $1.03. Revenue was $771.9 million, beating Wall Street estimates of $768 million and growing 18% year-over-year.However, management slightly reduced its full year fiscal 2020 revenue guidance, forecasting revenue of between $3.44 billion and $3.48 billion, just below its previous forecast of between $3.45 billion and $3.48 billion. Adjusted EPS is expected in the range of $4.90 to $5.00, lower than the initial forecast of between $5 and $5.10. But total billings for the year are expected at between $4.105 billion and $4.165 billion, higher than the previous expectations of $4.083 billion and $4.152 billion.
Read the full article here
Shares of cyber security provider Palo Alto Networks (PANW - Get Report) fell sharply after the company posted revenue and earnings that beat estimates, but disappointing guidance. The stock fell 7.92% to $230.45 a share after-hours on Monday, after having gained 1.36% in regular hours.
Adjusted earnings per share came in at $1.05 for its quarter ended October, beating analysts estimates of $1.03. Revenue was $771.9 million, beating Wall Street estimates of $768 million and growing 18% year-over-year.However, management slightly reduced its full year fiscal 2020 revenue guidance, forecasting revenue of between $3.44 billion and $3.48 billion, just below its previous forecast of between $3.45 billion and $3.48 billion. Adjusted EPS is expected in the range of $4.90 to $5.00, lower than the initial forecast of between $5 and $5.10. But total billings for the year are expected at between $4.105 billion and $4.165 billion, higher than the previous expectations of $4.083 billion and $4.152 billion.
Read the full article here
Palo Alto (NYSE: PANW) latest stock valuation
So based on the group's latest earnings report what do we value the stock at? Well it is extremely hard to value a stock that is making a loss per share as earnings per share or dividends paid tend to be used in most stock valuation models. But the non-GAAP income per share can be used to assist in the stock valuation. Based on their earnings report our valuation model sets a target price or full value price for Palo Alto at $137.10. We therefore believe the stock is overvalued and expect it to pull back from current levels to more reasonable valuation levels closer to our target price.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which is $137.10 in this case. A good entry point into Palo Alto would therefore be at $123.40 or below.
Considering the fact that Palo Alto is trading at almost double our target (full value) price we rate the stock of Palo Alto as a sell.
At some time top line growth will have to filter through into bottom line line earnings. Until such time we will rate Palo Alto as a sell
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which is $137.10 in this case. A good entry point into Palo Alto would therefore be at $123.40 or below.
Considering the fact that Palo Alto is trading at almost double our target (full value) price we rate the stock of Palo Alto as a sell.
At some time top line growth will have to filter through into bottom line line earnings. Until such time we will rate Palo Alto as a sell
Next earnings release of Palo Alto
It is expected that Palo Alto will release their 2nd quarter 2020 earnings report in late February 2020