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Bear of the Day: Palo Alto Networks (PANW)

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Palo Alto Networks (PANW - Free Report) is the $20 billion provider of a network security platform to enterprises and government. The core of its platform is the company's firewall that delivers natively integrated application, user, and content visibility and control through its operating system, hardware, and software architecture.
 
On September 4, PANW delivered top and bottom beats but guidance that was below analyst projections.
 
Palo Alto reported Q4 fiscal 2019 (ended July) non-GAAP earnings of $1.47 per share, which not only improved 14.8% year over year but also surpassed the Zacks Consensus Estimate of $1.45.
 
Moreover, the company’s revenues of $805.8 million increased 22% year over year, outpacing the consensus estimate of $803 million.
 
The impressive results were mainly driven by several deal wins and the increasing adoption of the company’s next-generation security platforms. Growing traction in newer Prisma and Cortex offerings was another tailwind.
 
In a parallel announcement, Palo Alto clarified its intent to acquire the IoT security start-up Zingbox for $75 million.
 
Guidance Hits Estimates
 
For the first quarter of fiscal 2020, Palo Alto anticipates revenue growth of 16-17% year over year. Billings growth is anticipated between 15% and 17% year over year.
 
Non-GAAP earnings per share are estimated in the range of $1.02-$1.04, which includes expenses related to the acquisition of Zingbox. The Zacks consensus prior to this reveal was for $1.34.
 
For fiscal 2020, the company expects billings to increase in the range of 17-19% year over year. Revenue growth for the fiscal is envisioned to grow within 19-20% year over year. The company expects billings growth of its next-generation security business (Prisma and Cortex) at 77-79%.
 
Non-GAAP earnings per share are estimated in the band of $5-$5.1 for fiscal 2020. The FY 2020 Zacks consensus (started August) was calling for full-year EPS of $6.23. The fresh guidance for the year would indicate a 7% decline in annual earnings.
 
Still a Force, But Needs Time
 
Palo Alto Networks is a premier security platform for enterprises with a majority of Fortune 500 companies as customers. The company is projected to growth sales at over 19% this year and next.
 
But until this earnings hiccup is sorted out, it's best to stand aside. Next quarter will offer more clarity on the outlook. And the Zacks Rank will let you know which way estimates are moving.
 
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