A 'Top-To-Bottom Beat' From Palo Alto In Q4; Is CFO Exit A Concern?

Palo Alto Networks IncPANWearnings report, which also included an executive change.

Deutsche Bank's Karl Keirstead maintains a Hold rating on Palo Alto's stock with an unchanged $150 price target as the company did report a "top-to-bottom" beat in its results. The company's guidance for the fiscal first quarter was in-line to slightly below expectations management's full year guide was "solidly above."

Palo Alto did benefit in the quarter from gained market shares through sales execution and product strength but was also boosted by broader demand across the entire firewall market, Keirstead continued. But the announcement that the company's chief financial officer, Steffan Tomlinson, will retire shouldn't come as a complete surprise but it is still "somewhat worrisome." On top of that, management also expressed caution surrounding its exposure to government spending in the third quarter and this represents a "cloud hanging over IT spend due to budget uncertainties."

Nevertheless, this is factored into the company's fiscal first-quarter guidance, which would explain the slight shortfall.

Finally, Palo Alto's billings guide is weighted toward the back half of the fiscal year and the company still has one to two more quarters before it can exit its sales reorganization plan, the analyst added.

Bottom line, Palo Alto still has some "moving pieces" it needs to address, including the CFO's departure, before investors should become buyers. In the meantime, the company is expanding margins and cash flow while also taking share away from its competitors.

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