My Pair Trade: Short Palo Alto Networks / Long VASCO Data Security International
Amit Ghate • 31 Comments
Amit Ghate • 31 Comments
Strong Share Growth And Margins Fueling Palo Alto Networks
Stephen Simpson, CFA • 10 Comments
Stephen Simpson, CFA • 10 Comments
Fri, May 27, 3:00 PM
Fri, May 27, 1:00 PM
- Palo Alto Networks (NYSE:PANW) is off 12.1% following yesterday's earnings report where the company's loss widened on a GAAP basis, and many analysts are lowering targets accordingly, though several advocate buying on weakness.
- While gross profit had swelled to $250.9M from the prior year's $169.8M, sales and marketing expenses went up 54% to $202M, eating up most of that gain. And the company provided in-line guidance and (some analysts noted) didn't beat by the "usual" amount.
- PANW is down to $130.37 today. Goldman Sachs has a Buy rating but lowered its price target to $165 from $188; JPMorgan Chase (Overweight) lowered its target to $196 from $216; RBC Capital (also Outperform) lowered to $185 from $195; and along with slashing its target to $150 from $210, Deutsche Bank downgraded to Hold (saying that for the first time, the company doesn't seem so insulated from macro demand pressures hitting the sector).
- Piper Jaffray is staying bullish, for one. It cut its price target to $167 from $180 but also maintained its Overweight rating: "Based on guidance, we estimate billings growth will decelerate to ~38% in FQ4 (July), though that was off a tough comp. Despite the slowdown, we believe Palo Alto still offers best-in-class growth, coupled with strong FCF margin."
Fri, May 27, 12:45 PM
Fri, May 27, 9:12 AM
Thu, May 26, 5:46 PM
- Several security tech names are selling off after next-gen firewall leader and cybersecurity poster child Palo Alto Networks (PANW - down 9.4%) offered in-line guidance (below consensus at the midpoints) to go with an FQ3 sales beat and in-line EPS, disappointing investors accustomed to seeing Palo Alto provide above-consensus sales guidance with its results.
- Palo Alto's billings rose a solid 61% Y/Y in FQ3, nearly on par with FQ2's 62% growth and outpacing revenue growth of 48%. Product revenue rose 33%, and services revenue (boosted by subscription offerings such as WildFire) 63%. EPS was pressured by a 50% Y/Y increase in GAAP operating expenses to $309.5M.
- FireEye (NASDAQ:FEYE) is down 2% after hours. CyberArk (NASDAQ:CYBR) is down 2.4%. Imperva (NYSE:IMPV) is down 1.7%. Fortinet (NASDAQ:FTNT) is down 1.5%.
- ETF: HACK
Thu, May 26, 5:39 PM
Thu, May 26, 4:18 PM
- Palo Alto Networks (NYSE:PANW) has slid 10.6% after hours after posting a wider loss in fiscal Q3, though revenue grew by nearly half with the help of new customers in its services unit.
- Net loss on a GAAP basis swelled to $70.2M from a year-ago $45.9M. But on a non-GAAP basis, net income grew to $38.5M from the prior $20.5M, after backing out $112.7M in share-based compensation charges.
- Billings rose 61% to a record $486.2M. Cash flow from operations was up 95% to $170.1M (margin of 49%); free cash flow also grew 95% to $150.8M (margin of 44%).
- Revenue breakout: Product, $162.1M (up 33.4%); Services, $183.7M (up 63%).
- For fiscal Q4, it's guiding to revenues of $386M-$390M (growth of 36-37%, and vs. consensus for $389.3M) and non-GAAP EPS of $0.48-$0.50 (vs. consensus for $0.50).
- Conference call to come at 4:30 p.m. ET.
- Press release
Thu, May 26, 4:05 PM
Wed, May 25, 5:35 PM
Thu, May 12, 9:40 AM
- Palo Alto Networks (NYSE:PANW) down as much as 3.7% early on after Piper Jaffray says their checks have uncovered a slowdown in demand.
- Firm says a number of companies within the security sector reported healthy results in Q1, but guided Q2 below expectations. "Initially we believed the weak guidance was attributable to b company-specific issues, though our recent round of channel checks suggests a broader slowdown in demand trends.
- "We still expect Palo Alto to report solid FQ3(Apr) results, though we are concerned with regard to billings growth expectations in the forward quarters."
- PANW trades at 8-10x revenue; any hiccup can mean a steep move in the stock.
- Now read The Letter From The IRS You Should Dread »
Fri, May 6, 2:17 PM
- Palo Alto Networks (PANW -3.7%), Proofpoint (PFPT -3.6%), Rapid7 (RPD -2.1%), Identiv (INVE -7.5%), and Vasco (VDSI -3.1%) are selling off after security tech peers FireEye (down 18.8%), Imperva (down 25.2%), and CyberArk (up 1.5%) delivered their Q1 reports.
- FireEye, likely the biggest culprit behind the selloff, posted mixed Q1 results (sales missed, EPS beat), offered light Q2 and full-year revenue guidance (full-year billings guidance was affirmed), and announced (as part of a larger management shakeup) Kevin Mandia is replacing Dave DeWalt as CEO. The company's product (hardware/software) revenue fell 16% Y/Y amid tough competition in the malware-prevention space from Palo Alto and Cisco - Palo Alto's WildFire malware-detection service has been growing like its name - while its services/subscription revenue grew 58% thanks to both organic growth and M&A.
- Imperva beat Q1 EPS estimates and posted roughly in-line revenue, but offered soft Q2 sales guidance blamed on European execution and (to some extent) web app firewall weakness. The company promises it's fixing both issues.
- CyberArk beat Q1 estimates and offered Q2/2016 guidance that was generally favorable to consensus. The company's license revenue growth slightly accelerated in Q1 to 38% from Q4's 35%.
- The PureFunds ISE Cyber Security ETF (HACK -2.3%) is down 13% YTD.
Fri, Feb. 26, 9:17 AM
- Gainers: RRM +49%. SUNE +31%. AMTG +31%. SGMS +27%. STMP +26%. GOL +19%. SPLK +17%. JCP +16%. HLF +13%. BIDU +11%. SYN +10%. GLBL +8%. WLL +9%. FCX +7%. CHK +7%. PANW +8%. NRF +6%. TCK +6%. MRO +6%. KHC +6%. GRPN 5%. HLT 5%.
- Losers: RJET -83%. PPHM -60%. CARA -36%. WTW -28%. SWN -14%. GG -11%. FOLD -9%. RBS -8%. MNKD -6%. ARI -5%.
Thu, Feb. 25, 11:01 PM
- Following a 4.9% after hours gain, Palo Alto Networks (NYSE:PANW) is up double-digits since the company's FQ2 report (featured a slight EPS beat, a strong revenue beat, and mixed FQ3 guidance) leaked shortly before the close. Expectations were relatively low thanks to soft numbers from enterprise tech peers and cautious analyst notes.
- In tandem with its report, Palo Alto has announced Frank Caldeoni, currently Red Hat's CFO and before that the CFO of top firewall rival Cisco, has joined the board. Palo Alto's board now has nine members. (board bio page)
- Billings/free cash flow: Billings rose 62% Y/Y in FQ2 to $459M, outpacing revenue growth of 54% (to $334.7M) and slightly topping FQ1's 61% growth. Billings growth led the deferred revenue balance to rise by $124M Q/Q to $929M, and helped free cash flow rise 93% Y/Y to $136.4M (compares with net income of $36.3M). A 40% free cash flow margin is expected in FQ3.
- Financials: Product revenue rose 47% Y/Y to $169.9M. Services revenue (boosted by WildFire, AutoFocus, and other subscription services) rose 61% to $164.8M. GAAP gross margin fell 80 bps Y/Y to 71.9%. Operating expenses rose 50% to $295.8M, with $187.6M spent on sales/marketing. Palo Alto ended FQ2 with $965M in cash and $498M in convertible debt.
- Palo Alto's results/guidance, earnings release
Thu, Feb. 25, 3:57 PM
- Palo Alto Networks (PANW +9.7%): FQ2 EPS of $0.40 beats by $0.01.
- Revenue of $334.7M (+53.8% Y/Y) beats by $16.38M.
- Expects FQ3 revenue of $335M-$339M (+43%-45% Y/Y) and EPS of $0.41-$0.42 vs. a consensus of $334.6M and $0.45.
- Shares spiked higher before getting halted.
- Update (4:16PM ET): Palo Alto is holding onto its gains after resuming trading: Shares are up 2.1% after hours to $143.17, after finishing regular trading up 9.7%.
Wed, Feb. 24, 5:35 PM
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Thu, Feb. 18, 1:29 PM
- JMP Securities states its Palo Alto Networks (PANW -9.4%) reseller checks indicate shipping activity towards the end of FQ2 (the January quarter) was "more rushed than usual." The firm thinks this suggests Palo Alto faced "a challenging sales environment" during the quarter, while adding it believes overall sales momentum remains strong.
- Six days ago, Cleveland Research reported Palo Alto partner checks pointed to moderating growth and less potential sales upside. Wells Fargo and D.A. Davidson have provided more upbeat commentary over the last two weeks; Morgan Stanley is defending the company today.
- Palo Alto has tumbled towards $120 following JMP's note. FQ2 results are due on the afternoon of Feb. 25.
Palo Alto Networks, Inc. engages in the provision of network security solutions. It offers network security functions which include threat protection, firewall, intrusion detection system, intrusion prevention system and uniform resource locator filtering. The company was founded by Nir Zuk,... More
Industry: Security Software & Services
Country: United States