Palo Alto's 'Strong' Execution Was Overshadowed By 2 Factors

Shares of Palo Alto Networks Inc

plunged 13 percent after the cybersecurity firm issued weak fourth quarter outlook despite reporting strong third quarter results. But, BTIG is bullish on the company's long-term thesis and would be buyers on any weakness. Palo Alto's quarterly EPS of $0.42 was in in-line and its sales of $345.8 million topped Street view of $339.48 million. "Palo Alto's product revenue segment decelerated (attributable to a change in mix to subscription) and "back end loaded" deals overshadowed otherwise strong execution in F3Q16," BTIG analyst Joel Fishbein wrote in a note. Among other metrics, Palo Alto's services segment revenue of $184 million was ahead of the Street's $174 million. Product revenue was $162 million, which fell short of the Street's $166 million. Billings of $486 million beat the Street's $459 million estimate. However, the company guided fourth quarter EPS of $0.48 - $0.50, lower than the consensus estimate of $0.50. Palo Alto sees fourth quarter sales of $386 million - $390 million versus estimate of $389.3 million. "We believe Palo Alto's F4Q16 revenue guidance is conservative given their strong product portfolio, increasing subscription renewals, and robust deal pipeline," Fishbein highlighted. Fishbein maintained his Buy rating and $210 price target saying "While the near term sentiment will likely turn negative, we believe Palo Alto's security platform continues to capture share in a crowded market and we remain bullish over the long term." At the time of writing, shares of Palo Alto dropped 11.98 percent to $130.43.