Despite Mixed F1Q17 Results, Palo Alto Networks (PANW) Is Still a Buy For Oppenheimer

By Carrie Williams

despite-mixed-f1q17-results-palo-alto-networks-inc-panw-remain-a-buy-at-oppenheimerAnalyst Shaul Eyal from Oppenheimer reiterated his Buy rating today on the network and enterprise security provider, Palo Alto Networks Inc. (NYSE: PANW), and set a $184 price target. This price target is an upside of 14.24% from the last close price of $161.05. Shaul Eyal is a top 100 analysts according to TipRanks, with an average return of +11.4% and a 60% rate of successful recommendations.

PANW has posted a mixed F1Q17 results yesterday evening, prompting its shares to drop by almost 14% after hours.  While the earnings reported were above Wall Street views (EPS of $0.55 beat estimates by $0.02), both revenue ($398.1 million instead of estimated $400.2 million) and billings ($517 million vs estimated $525 million) missed the estimates. The widening expenses reported by PANW also contributed to the selling spree. The guidance too, was a mixed bag, with F2Q17 EPS of $0.61-0.63 on revenues of $426-432 million, due to the weaker than expected product revenue growth ($163.8 million vs. the Street’s $166.9 million).

Although Eyal expressed disappointment regarding the tepid FQ1 results, the analyst also indicated confidence in PANW and consider the dip in share prices as a good buying opportunity. Eyal explains,

”While PANW’s mixed results are somewhat disappointing, we remain confident in its leadership position and ability to expand its platform. The after-hours dip (-13%) could be an attractive buying opportunity reflecting 11.1x FY18 FCF. We maintain our Outperform rating and price target of $184 based on a 6.8x EV/FY18E revenue and 15x EV/FY18E FCF.”

PANW’s major positive driver is the solid momentum in SaaSbased subscription revenue, as indicated by the 65% YoY growth to $121.2M due to notable strength in Traps, VM-Series, AutoFocus, and Wildfire. The new product launches in the VM-Series, the M-1000 appliance, the PA-300 Series, and the WildFire malware prevention subscription is also expected to drive customer growth for the company as well as  sustain higher growth rates in the yet to be fully untapped $10 billion network security market.

The average analyst price target of PANW, based on data compiled by TipRanks.com, is $183.53 with a Strong Buy consensus rating. Compared to the current stock’s price the analyst price target is a 27.25% upside.