Palo Alto Networks stock rallies on another beat-and-raise quarter

Palo Alto Networks stock rallies on another beat-and-raise quarter

Shares of Palo Alto Networks Inc. rallied in Thursday’s extended session after the cybersecurity company added another straight quarter of beat-and-raise to its collection and possibly renewed its M&A habit.

Palo Alto Networks PANW,
Shares rose as much as 6% after hours, after falling 1.6% in the regular session to close at $156.56. All per share figures represent the company’s three-for-one stock split on September 14.

The company said it expects adjusted earnings of 76 cents to 78 cents per share on revenue of $1.63 billion to $1.66 billion and charges of $1.94 billion to $1.99 billion for the fiscal second quarter. Analysts polled by FactSet had forecast 70 cents a share on revenue of $1.65 billion and charges of $1.99 billion.

Palo Alto Networks also said it raised its outlook for the year “broadly” and now sees full-year earnings of $3.37 to $3.44 per share, up from a previous range of $3.13 to $3. $17 per share when accounting for the split. On revenue and charges, the company slightly raised the upper ends of its guidance ranges for revenue from $6.85 billion to $6.91 billion and charges from $8.95 billion to $9.1 billion.

Analysts expect $3.16 per share on revenue of $8.97 billion and charges of $8.58 billion for the year.

In a call with analysts, Palo Alto Networks President and CEO Nikesh Arora said customers are focused on mid- to long-term projects and the company needs to be more proactive with them and get them to close deals sooner.

“We see cyber security spending as resilient but not immune to customers adapting to the current environment,” Arora said. “Having said that, I continue to believe that we can overcome these macro impacts with strong and focused execution.”

Chief Product Officer Lee Klarich suggested analysts don’t look at product refreshes for “a single quarter.”

“Most of our customers are large enterprise customers,” Klarich said. “They make long-term decisions. These decisions take place in one, two, three and more years. So these tougher renewals play out in cycles like this as opposed to specific quarters.”

It also appears that mass layoffs in the tech industry have helped solve Palo Alto Networks’ talent problem.

Reading: Amazon, Cisco Roku, Meta, Twitter, Intel: Here are the companies at the center of layoffs

“It was only six to nine months ago that we were talking about the challenges we face and the competition for talent,” said CEO Arora. “Now we find it easier to recruit and hire talent.”

For the first fiscal quarter, Palo Alto Networks reported net income of $20 million, or 6 cents per share, compared with a loss of $103.6 million, or 35 cents per share, in the year-ago period, for the second consecutive quarter of unadjusted earnings.

Adjusted earnings, which exclude stock-based compensation and other items, were 83 cents per share, compared with 55 cents per share in the year-ago period.

Revenue rose to $1.56 billion from $1.25 billion in the previous quarter. Charges, which reflect future contract activity, rose 27% to $1.7 billion from a year ago.

Analysts had forecast earnings of 69 cents per share on revenue of $1.55 billion and charges of $1.69 billion.

The company has been racking up beat-and-raise quarters of late. In August, the company closed its fiscal year on a strong note after raising its full-year outlook for the third quarter in a row in May.

Palo Alto Networks said it will acquire application and software supply chain security company Cider Security for about $195 million in cash, with an expected closing in the quarter ending in January.

In August 2021, Palo Alto Networks took a break from what had been a series of new deals every quarter, having acquired 14 companies in about three and a half years.

Shares of Palo Alto Networks are down 16% for the year. In comparison, the ETFMG Prime Cyber ​​Security ETF HACK,
down 27%, the First Trust Nasdaq Cybersecurity ETF CIBR,
is off 24%, the S&P 500 SPX,
down 17%, and the tech-heavy Nasdaq Composite Index COMP,
that’s 29% off.

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