Palo Alto Networks Inc PANW has been consistently reporting results ahead of consensus estimates, while its guidance relative to expectations has been mixed.
“Given the outperformance in the stock year to date, we believe that an in-line guide will be good enough to support the stock,” BMO Capital Markets’ Keith Bachman said in a report.
Bachman maintains a Market Perform rating on Palo Alto, while raising the price target from $150 to $160.
How Shares May Respond
In the recent quarters, the company’s guidance relative to consensus estimates has been mixed and this has impacted the stock significantly. For the past three quarters, Palo Alto’s revenue guidance has been short of the consensus estimates.
Although the revenue guidance missed expectations by less than 1 percent in the July and October quarters and by ~2 percent in the October quarter, the company’s shares have declined 7-13 percent a day after the announcements, Bachman noted.
Related Link: Here's Why Citron's Andrew Left Sees Palo Alto Going To $170
The analyst raised the revenue estimate for FY 2017 and 2018 from $1.80 billion to $1.81 billion and from $2.30 billion to $2.36 billion, respectively.
“PANW has consistently delivered upside to billings results, but the amount of upside relative to consensus estimates has been decelerating,” Bachman mentioned. He expects the company’s billings growth to decelerate from 56 percent in FY 2016 to 29 percent in 2017 and to 28 percent in 2018, which could “weigh on valuation.”
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