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Palo Alto Networks Inc (NYSE:PANW) Gets Ready to Rock or Be Rocked

Palo Alto Networks Inc (NYSE:PANW) is set to hit the wires with its fiscal Q1 results this afternoon and management will host a call at 4:30 PM EST. This will be the second quarter under Nikesh Arora, who joined the company from Google in June.

If you aren’t that familiar with the name, PANW is a leadership play in software security. We have seen consistent demand growth in that space in general, and no signs of that ebbing out. The stock itself trades at an EV/Revenue ratio of just 5.1, which makes it one of the cheaper cloud plays around right now.

Palo Alto Networks Inc (NYSE:PANW) guided for fiscal first quarter non-GAAP earnings per share (EPS) of $1.04-1.06 (vs. $0.74 last year) with revenue up 25-27% to $625-635 million. The company has exceeded estimates on the top and bottom line six quarters in a row and guided revenue for the following quarter revenue above consensus three consecutive quarters.

Last quarter, EPS grew 39%, free cash flow (FCF) grew 33%, revenue grew 29% and billings rose 29% as customers grew 27% to over 54,000.

The company has been revamping its leadership, poaching some top Google talent from just down the street in Mountain View along the way. Besides Arora, the company also brought in former Google Cloud Platform President Amit Singh as its new company President.

The company also closed the $173 million cash acquisition of RedLock, a cloud threat defense company.

As far as built-in expectations, the stock has been sliced and diced over the past two months along with everything else in the Cloud space. At this point, analysts expect fiscal 2019 non-GAAP EPS up 26% with revenue up 22%.

Besides being cheap on an Ev/Rev basis (which is generally the most important metric for sell-side analysts looking at cloud plays), and cheap on a free cash flow basis, PANW is also the fastest top-line growth play among large cap pure-play cybersecurity companies.

With a $16.7 billion valuation, Palo Alto Networks trades just under ~6x fiscal 2019 sales or ~14x FCF estimates for the next twelve months. The options market is pricing in a ~7% move in the stock tomorrow.

Technically, with portfolio managers suddenly looking at a position 2018 S&P benchmark (after yesterday’s large rally), we could see a strong report aggressively bought given the valuation in play here as well as the beta offered by the stock, which brings into play several important resistance levels.

Most importantly, on a particularly strong gap, we have the $200 psych level right in direct confluence with both the 50-day and 200-day simple moving averages.

 

Elevator Ride

Palo Alto Networks Inc (NYSE:PANW) promulgates itself as a security platform solutions worldwide.

The company provides firewall appliances and software; Panorama, a security management solution for the control of appliances deployed on an end-customer’s network as a virtual or a physical appliance; and Virtual System Upgrades, which are available as extensions to the virtual system capacity that ships with physical appliances.

It also offers subscription services covering the areas of threat prevention, uniform resource locator filtering, malware and persistent threat, laptop and mobile device protection, and firewall, as well as cyber-attack, threat intelligence, and content control.

In addition, the company provides support services; and professional services, including application traffic management, solution design and planning, configuration, and firewall migration, as well as online and classroom-style education training services.

Palo Alto Networks, Inc. sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. The company was founded in 2005 and is headquartered in Santa Clara, California.

In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.4B against $2.1B).

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