Solid Quarter Expected For Palo Alto, Macquarie Calls It 'Best In Breed'

Macquarie analysts expect solid results from Palo Alto Networks Inc PANW, driven by product revenue and accelerated subscription sales growth. These positives would be compensated by a tough environment on spending besides tough competition from Cisco.

The brokerage reiterated its Neutral rating and maintained its price target of $139 on shares. Despite expecting solid results and compelling EV/FCF valuation, the analyst will remain on the sidelines.

In a note, the analysts said, "Our checks were constructive on the quarter (though we note our new/limited history with our resellers) as we found that Palo Alto was able to hold in well on pricing with high levels of activity right into the end of the quarter. Palo Alto Networks remains the clear industry disruptor, but we believe the overall network security market is sluggish, at least for now, as customers digest recent higher spending levels."

Following the 33 percent decelerating product revenue in the third quarter, analysts are concentrating on Palo's product tactics.

The stock traded up $1.61, or 1.14 percent, to $143.10 on Tuesday.