Pacific Crest On Palo Alto: 'Take Advantage Of Buying Opportunities'

Following the robust billings and revenue growth reported by Palo Alto Networks Inc PANW, Pacific Crest’s Rob Owens stated that the stock was “trading at a reasonable multiple on various cash flow metrics, which presents a buying opportunity.”

Owens maintains an Overweight rating on the company, with a price target of $190.

Share Gains Continue

Palo Alto reported year-on-year billings growth of 61 percent, with revenue growth of 48 percent, which the analyst believes would be overshadowed by the revenue guidance, the midpoint of which came in below consensus.

“Despite a volatile macro environment, Palo Alto continues to outpace the security industry,” Owens mentioned, while adding, “Mix did shift to subscription and services revenue, with more pronounced seasonality in product revenue than in our forecast.”

The analyst pointed out that strong new customer additions and expansion in existing customers drove the results.

Related Link: CyberSecurity Follows Palo Alto's Lead

Subscription revenue grew 63 percent year-on-year and now contributes 27 percent of the total revenue.

Buying Opportunity

“As Palo Alto continues to release more software modules and adjacent solutions, we believe this component will be a meaningful driver for growth and profits. Take advantage of buying opportunities,” the Pacific Crest report said.

Owens noted that Palo Alto was not immune to the tough macro environment, which was reflected in the conservative July quarter guidance. The company also indicated that security continued to be its top priority, driven by “abundant demand.”