Why Palo Alto Stock is Still Depressed

Shares of Palo Alto have remained depressed a week after it experienced heavy selling, when it released its latest quarterly earnings report.

On Monday last week, Palo Alto released its first quarter earnings report for fiscal 2017. The results were mixed, but a bland outlook sent the company’s stock tumbling over 14% later in the day. Investors interpreted the plunge as a knee-jerk reaction, but a week later, the stock remains suppressed.


The cyber security provider reported adjusted earnings of $0.55 per share, beating consensus earnings estimates of $0.52 per share. Revenues for the quarter came in at $398 million, well below the Wall Street average forecast of $400 million, and near the lower end of the company’s earlier guidance of $396 million to $402 million.

Weak Outlook

The intriguing aspect for market participants is that Palo Alto delivered a bottom line beat, but the stock is yet to recover from the initial dip. The main reason for this was the soft outlook that the company delivered for the current quarter. Palo Alto expects to earn $0.61 to $0.63 per share on revenues of $426 million to $432 million. In contrast, Wall Street had modeled for earnings of $0.63 per share on revenues of $439 million. Despite the miss, it is clear that both earnings and revenues are expected to maintain an upward trajectory.

Solid Industry Performance

Compared to its competition, Palo Alto performed incredibly well. According to the company’s CFO, Steffan Tomlinson, Palo Alto added 1,500 new customers during the quarter, while existing customers warmed up admirably to the new Next-Generation Security Platform.

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Palo Alto is expecting its profits to tick higher in an industry where the competition is struggling to avoid losses. Company billings rose 33% year over year, while deferred revenues ended the quarter 69% higher than it was during the same period last year. This is proof that the hybrid-SaaS model Palo Alto is implementing will help the company sustain growth in both earnings and revenues.

Stock Performance

Currently trading at $141.51, Palo Alto stock has largely been ranging the whole of 2016. The stock has a 12-month low of $111.09 and a high of $194.73. After the 14 percent plunge in Monday afterhours trading, Palo Alto is now 19.66% down year to date. Although currently a falling knife, Palo Alto is backed by exciting fundamentals and investors may view the current dip as a great opportunity to take up the stock.

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