|
Related Topics
|
Category: Stock Market and Palo Alto
Date: 24 May 2020 Stock Price: $237.39 We take a look at the 3rd quarter earnings for their 2020 fiscal year of Palo Alto the cybersecurity and cloud provision company. While they are still reporting strong tipe line growth their bottom line continues to reflect losses.
The world will likely be in a state of transition over the next 12 to 18 months due to the COVID-19 pandemic. We believe this will prompt key trends to accelerate, including remote working models, shift to the cloud, and focus on AI/ML and automation to drive effective cybersecurity outcomes." |
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 3rd quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Total revenues: $869.4 million (up from $726.6 million from the same quarter of the previous year)
- Total revenue increased by 19.6% over the last 12 months
- Total cost of revenue: $258.3 million (up from $204.9million for the same quarter of the previous year)
- Total cost of revenue of increased by 26.1% over the last 12 months
- Net loss: -$74.8 million (down from -$20.2 million for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 96.7 million (up from 94.4 million for the same quarter of the previous year)
- Diluted net income per share: -$0.77 (down from -$0.21 for the same quarter of the previous year)
- Cash and cash equivalents: $1.484 billion
- Cash and cash equivalents per share: $15.34
- Cash and cash equivalents makes up 6.4% of Palo Alto's current market capital
- Cash and cash equivalents makes up 22.8% of Palo Alto's total assets
- Accounts receivable: $668.8 million
- Accounts receivable makes up 10.3% of the group's total assets
- Goodwill in Palo Alto : $1.812 billion
- Goodwill per share: $18.74
- Goodwill makes up 7.89% of Palo Alto's total assets
- Total shareholders' equity of Palo Alto : $744.7 million
- Shareholders' equity per share: $7.71
- Palo Alto is trading at 30.8 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
- For some perspective the average price to book value of firms in the S&P 500 is 3.7. Read more about the S&P 500 here
Palo Alto's management commentary on their 3rd quarter 2020 earnings report
SANTA CLARA, Calif., May 21, 2020 /PRNewswire/ -- Palo Alto Networks (NYSE: PANW), the global cybersecurity leader, announced today financial results for its fiscal third quarter 2020, ended April 30, 2020.
"The world will likely be in a state of transition over the next 12 to 18 months due to the COVID-19 pandemic. We believe this will prompt key trends to accelerate, including remote working models, shift to the cloud, and focus on AI/ML and automation to drive effective cybersecurity outcomes," said Nikesh Arora, chairman and CEO of Palo Alto Networks. "Palo Alto Networks is well positioned to leverage the acceleration of these trends, with our significant and ongoing investments to transform our company into a multi-product, integrated platform provider of cybersecurity solutions. As our performance this quarter demonstrates, we are entering this transition in a position of strength, and while the path might be bumpy, we believe we will emerge stronger as we continue providing the best security solutions for our customers."
"The world will likely be in a state of transition over the next 12 to 18 months due to the COVID-19 pandemic. We believe this will prompt key trends to accelerate, including remote working models, shift to the cloud, and focus on AI/ML and automation to drive effective cybersecurity outcomes," said Nikesh Arora, chairman and CEO of Palo Alto Networks. "Palo Alto Networks is well positioned to leverage the acceleration of these trends, with our significant and ongoing investments to transform our company into a multi-product, integrated platform provider of cybersecurity solutions. As our performance this quarter demonstrates, we are entering this transition in a position of strength, and while the path might be bumpy, we believe we will emerge stronger as we continue providing the best security solutions for our customers."
Financial Outlook
Palo Alto Networks provides guidance based on current market conditions and expectations.
For the fiscal fourth quarter 2020, we expect:
For the full year fiscal 2020, we expect:
Palo Alto Networks provides guidance based on current market conditions and expectations.
For the fiscal fourth quarter 2020, we expect:
- Total billings in the range of $1.190 billion to $1.210 billion, representing year-over-year growth of between 13% and 14%.
- Total revenue in the range of $915 million to $925 million, representing year-over-year growth between 14% and 15%.
- Diluted non-GAAP net income per share in the range of $1.37 to $1.40, which incorporates approximately $8 million of net expense, or $0.06 per share, related to the acquisition of CloudGenix, using 96.0 million to 98.0 million shares.
For the full year fiscal 2020, we expect:
- Total billings in the range of $4.102 billion to $4.122 billion, representing year-over-year growth of 18%.
- Total revenue in the range of $3.373 billion to $3.383 billion, representing year-over-year growth between 16% and 17%.
- Diluted non-GAAP net income per share in the range of $4.78 to $4.81, using 98.0 million to 100.0 million shares.
- Adjusted free cash flow margin of approximately 27% - 28%, which excludes cash flow associated with the additional investment in our headquarters in Santa Clara and a cash payment associated with a litigation-related settlement.
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 Google search trends for Palo Alto stock price and PAWN stock price
The graphic below shows the trends in Palo Alto networks stock price and PANW stock price over the last 12 months in the United States as obtained from Google Trends. The graphic also shows that PANW stock price is a more popular search term than Palo Alto Networks stock price.
Palo Alto Networks (NYSE: PANW) stock vs Cisco Systems (NASDAQ: CSCO) stock
The image below shows the stock price performance of Palo Alto (PANW) compared to that of Cisco Systems (CSCO) over the last three years. As the image shows the trends in their respective stock prices are very similar. But over the three year period the stock of Palo Alto has outperformed that of Cisco Systems significantly, especially since the end of April 2020 when the stock of Palo Alto surged ahead.
Recent coverage of Palo Alto
The extract below covers the latest earnings report of Palo Alto as obtained from MarketWatch.com
Palo Alto Networks Inc. shares soared in premarket trade Friday after the cybersecurity company’s quarterly results and outlook topped Wall Street estimates as its product portfolio benefits from the COVID-19 pandemic. Palo Alto Networks PANW, +3.67% reported a fiscal third-quarter loss of $74.8 million, or 77 cents a share, compared with a loss of $20.2 million, or 21 cents a share, in the year-ago period. Adjusted earnings were $1.17 a share, compared with $1.31 a share in the year-ago period. Revenue rose to $869.4 million from $726.6 million in the year-ago quarter
The company expects adjusted fiscal fourth-quarter earnings of $1.37 to $1.40 a share on revenue of $915 million to $925 million, while analysts had forecast adjusted earnings of $1.31 a share on revenue of $916.8 million. Palo Alto Networks offers products like GlobalProtect and Prisma Access, which allow for secure network cloud access for businesses, something which is definitely getting a fair share of use with millions of employees working from home during the COVID-19 pandemic. The company has been on an M&A tear over the past few years, acquiring companies such as Demisto and Evident.io.
“The world will likely be in a state of transition over the next 12 to 18 months due to the COVID-19 pandemic,” Palo Alto Networks Chief Executive Nikesh Arora said in a prepared statement. “We believe this will prompt key trends to accelerate, including remote working models, shift to the cloud, and focus on AI/ML and automation to drive effective cybersecurity outcomes.”
Read the full article here
Palo Alto Networks Inc. shares soared in premarket trade Friday after the cybersecurity company’s quarterly results and outlook topped Wall Street estimates as its product portfolio benefits from the COVID-19 pandemic. Palo Alto Networks PANW, +3.67% reported a fiscal third-quarter loss of $74.8 million, or 77 cents a share, compared with a loss of $20.2 million, or 21 cents a share, in the year-ago period. Adjusted earnings were $1.17 a share, compared with $1.31 a share in the year-ago period. Revenue rose to $869.4 million from $726.6 million in the year-ago quarter
The company expects adjusted fiscal fourth-quarter earnings of $1.37 to $1.40 a share on revenue of $915 million to $925 million, while analysts had forecast adjusted earnings of $1.31 a share on revenue of $916.8 million. Palo Alto Networks offers products like GlobalProtect and Prisma Access, which allow for secure network cloud access for businesses, something which is definitely getting a fair share of use with millions of employees working from home during the COVID-19 pandemic. The company has been on an M&A tear over the past few years, acquiring companies such as Demisto and Evident.io.
“The world will likely be in a state of transition over the next 12 to 18 months due to the COVID-19 pandemic,” Palo Alto Networks Chief Executive Nikesh Arora said in a prepared statement. “We believe this will prompt key trends to accelerate, including remote working models, shift to the cloud, and focus on AI/ML and automation to drive effective cybersecurity outcomes.”
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 $158.90. 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 $158.90 in this case. A good entry point into Palo Alto would therefore be at $143.00 or below.
Considering the fact that Palo Alto is trading at almost double our target price (full value price) we rate the stock of Palo Alto as a sell. We continue to maintain that 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 $158.90 in this case. A good entry point into Palo Alto would therefore be at $143.00 or below.
Considering the fact that Palo Alto is trading at almost double our target price (full value price) we rate the stock of Palo Alto as a sell. We continue to maintain that 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 4th quarter 2020 earnings report in late August 2020