Will Palo Alto Report Another Beat and Raise Quarter?

02/23/2016 9:33 am EST

Focus: STOCKS

Michael Berger

President & Founder, Technical420.com

As it prepares to report earnings after the market closes on Thursday, Michael Berger of Technical420.com outlines several reasons behind why he’s favorable on this security platform company’s stock and thinks it could be an attractive investment prior to its earnings announcement.

Global stock markets got off to a rocky start during 2016 and this volatility created a number of opportunities for traders. This weakness, coupled with increased demand for data security software, has made us favorable on Palo Alto Networks, Inc. (PANW) as the company prepares to report earnings after the market closes on Thursday.

PANW specializes in multi-function next generation firewall appliances, which can replace several point solutions with one stand-alone appliance. The company pioneered application control technology which allows firewalls to place selective usage policies for an application rather than block it entirely.

PANW primarily 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 a number of industries.

Expect Another Beat and Raise Quarter

In October, PANW announced better than expected operating results and the company beat Wall Street revenue expectations. During the quarter, PANW also reported better than expected first quarter expectations. We expect to see PANW not only meet but exceed these higher expectations.

PANW continues to increase its geographic presence and take market share around the world. The company added 2,000 new customers during the previous quarter and this brought them to a total of 26,000 customers.

PANW to Benefit from Multi-year Spend Cycle

During 2016, PANW has fallen more than 26% and we see significant upside to current levels due to continued demand for its products and services. One of the main reasons for the increased demand is that PANW continues to drive a next generation replacement cycle of outdated firewall solutions.

Despite mixed results from security vendors and commentary suggesting that security spending growth could be moderating, we expect to see PANW beat expectations as demand for next generation firewall appliances, combined with sales of adjacent products like Wildfire, has not eased.

We believe that we are in the middle of a multi-year security spending cycle that should disproportionately benefit PANW as the dominant security platform vendor.

Michael Berger, Founder and President, Technical420.com

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