Palo Alto's Q2: 'Strength Across The Board'

Palo Alto Networks Inc PANW reported fiscal second quarter results, which not only included a top-and-bottom-line beat but showed "strength across the board," according to KeyBanc.

The Analyst

KeyBanc Capital Markets' Rob Owens maintains an Overweight rating on Palo Alto's stock with a price target boosted from $190 to $210.

The Thesis

Palo Alto is developing a reputation of consistently exceeding expectations in its earnings reports and Monday's report was no exception, Owens said in a note. Revenue of $542 million in the quarter exceeded the $525 million expected and the "vast majority" of the upside came from product revenue of $202 million, which was $15 million better than expected.

The earnings report also showed the company continues to benefit from hardware and platform upgrades and improved execution in targeting existing customers for new purchases, according to Owens. Palo Alto's momentum comes at a time when some of its biggest competitors appear to be "struggling a bit" on the product side.

Palo Alto is well positioned to benefit from an industry-wide refresh in the back half of 2018, the analyst said. As this cycle plays out over time, the company should see increased customer acquisition which will drive continue out performance in its results.

Price Action

Shares of Palo Alto were trading higher by more than 6 percent at $180, which is above the stock's 52-week high of $169.72.

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