Palo Alto's Shift To Cloud Business Seems To Be Accelerating

Palo Alto Networks Inc PANW reported robust FYQ4:16 results, with the revenue and EPS beating expectations.

D.A. Davidson’s Jack Andrews reiterated a Buy rating on the company with a price target of $186.

Strong Q4

The company reported its revenue for the quarter at $400.8 million, ahead of the estimate and the consensus.

The non-GAAP EPS also beat expectations, coming in at $0.50.

Palo Alto reported billings of $572.4 million, above the consensus and representing 45.4 percent year-on-year growth. However, billings fell short of the estimate.

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Record Customers

“Palo Alto Networks added a record 2,000+ customers in the quarter, yielding a total customer count of more than 34,000. The company’s Top 25 customers spent a minimum of $14.0 million in lifetime value,” Andrews mentioned.

Subscription and support renewal rates continued to be strong, coming in at more than 90 percent and 100 percent, respectively.

According to the D.A. Davidson report, “Despite concerns raised in FY3Q16, management cited a sequential improvement in the macro environment. While aggressive pricing behavior by competitors bears watching, management notched several notable customer wins.”

Palo Alto also recorded the highest number of Wildfire customer additions in history, bringing the total Wildfire customer count to more than 12,500.

However, the company issued its revenue guidance for FYQ1:17 at $396–$402 million, below the consensus expectations, although the EPS guidance beat the consensus at $0.51–$0.53.

“As hinted at during analyst day, PANW will now amortize sales commissions associated with product subscriptions rather than expensing them upfront,” the analyst added.

The estimates for FY17 and FY18 have been raised.

At time of writing, Palo Alto shares were up 3.35 percent on the day, trading at $137.66.

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