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Expect Near-Term Palo Alto Volatility; Goldman Sachs Still Bullish

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Expect Near-Term Palo Alto Volatility; Goldman Sachs Still Bullish
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Palo Alto Networks Inc (NYSE: PANW) reported its 3QFY revenues above the estimate and consensus, with in-line EPS.

Goldman Sachs’ Gabriela Borges maintains a Buy rating on the company, while lowering the price target from $188 to $165.

3Q Results

“There were moving pieces to the quarter that may create near-term stock volatility, such as mix shift to subscription from product revenue, an increasing percentage of LT deferred, and billings beats becoming smaller,” Borges mentioned.

Related Link: Here's Why The Market Should Love Palo Alto's Q3

The analyst believes there are very few investment opportunities that offer the kind of absolute growth and free cash flow profile that Palo Alto does.

The company reported its 3WFY revenue at $346 million, with EPS of $0.42, driven by higher opex offsetting the increase in revenue. The non-GAAP EBIT margins was lower than the consensus forecast.

Billings for the quarter stood at $486 million, beating consensus and representing 61 percent year-on-year growth.

Looking Ahead

Palo Alto guided to 4QFY sales of $386-$390 million, representing 36–37 percent growth and in line with expectations.

Management maintained the non-GAAP EBIT margin guidance at 18–19 percent, while guiding to in-line EPS.

Borges expects the company to continue to deliver solid share gains in its core market over the next 12 months, while the move to platform solutions is expected to accelerate during the same period. Margins are also expected to expand further.

Latest Ratings for PANW

DateFirmActionFromTo
Feb 2018KeyBancMaintainsOverweightOverweight
Jan 2018Deutsche BankUpgradesHoldBuy
Jan 2018Goldman SachsDowngradesBuyNeutral

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