Palo Alto Networks (NASDAQ:PANW) Moves Up After Raising Guidance

Highly-Valued Palo Alto Networks Growing By Double-Digits

Palo Alto Networks (NASDAQ:PANW) has been and will continue to be a pandemic-winner. The company is well-positioned in the tech space as a leader in cybersecurity and one focused on next-gen and cloud-centric solutions. The company caught my eye over the summer when it not only beat the consensus but also raised guidance, it did so again today by doing the very same things. The stock doesn’t present much value in light of the new “rotation to value” that has gripped the market but it has what other growth stocks don’t; a robust outlook for accelerating growth.

"We delivered another consecutive strong quarter of solid results; both our firewall transformation and our Next-Generation Security services continue to make great progress, giving us confidence to raise previously issued guidance for the year," said Nikesh Arora, chairman, and CEO of Palo Alto Networks. "We introduced several significant product enhancements across the portfolio and were recognized by industry analysts as a leader in two Gartner Magic Quadrants as well as Zero Trust. Additionally, we are excited about our proposed acquisition of Expanse, Inc., which we announced last week."

Palo Alto Networks Beats And Raises

Palo Alto Networks beat the consensus estimate for nearly all metrics that count. Aside from a miss on GAAP earnings and a slight QoQ decline in revenue everything else is positive and better than expected. The top-line revenue of $946 million fell from the previous quarter’s $950 million but the decline was seasonally expected and less than expected by 260 basis points. In terms of growth, the fiscal Q1 revenue is up 22.6% over the previous year versus a smaller 17.94% increase in the fiscal 4th quarter. That's an accelartion of 464 basis points.

Billings and Deferred Revenue both made solid advances over the previous year, up 21% and 31%, but both fell shy of the company’s own guidance. Moving down to the bottom line the results are mixed as well. The GAAP loss of ($0.97) fell short by ($0.46) while the more important adjusted EPS of $1.62 beat by $0.29.

Despite the shortfall in Billings versus the expectations, strength in the core business and new product lines are growing and supported management’s decision to raise guidance. The company is now expecting $975 to $990 in revenue for the 2nd quarter versus the consensus of $971. For the full year, execs are projecting $4.09 to $4.14 in revenue versus the $4.02 projected by the analysts.

The Analysts Are Bullish, But Not Bullish Enough

The analysts are generally bullish on this stock but their estimates are far to low for 2021. Palo Alto Network’s Q1 results are enough on their own to put the company firmly on track to beat the consensus estimates for the year. The increase to guidance merely assures that the sell-side community will need to issue another round of updates just like it did after the last earnings report. Refarding the community, there are 32 analysts covering the stock and 25 of them are bulls. The consensus target is only about 9% above the most recent price action which isn’t a lot but that was before the Q1 release. The high-end of the range is closer to 25% upside and a more-likely target given the results and guidance.

The Technical Outlook: Palo Alto Networks Is On The Verge Of New Highs

Palo Alto Networks popped after the Q1 report gaining more than 4.0% in early premarket action. The stock gapped up to trade just shy of the all-time high and it looks like a new all-time high should be expected. The candle shows signs of resistance but there are two caveats. The first is that this candle is not completed, the second is that convergences in the indicators point to higher prices. Traders should keep an eye on today’s high. A move above that would trigger a buy. Investors should be ready to buy on any weakness and add to that position when price action moves up to the new highs