Palo Alto Stock: A Strong Bet on Fundamentals

Posted On November 22, 2017 1:19 pm

Palo Alto Networks Inc. (NYSE:PANW) is an excellent technology stock with plenty of growth potential. The Santa Clara-based cybersecurity company’s revenue increased by 27% year over year to $509.1 million in the fourth quarter. Deferred revenue in the quarter jumped 43%. The massive rise in deferred revenue shows that Palo Alto’ strategy of focusing on subscription revenue is working. The company also announced that it added a record number of new customers in the fourth quarter. Palo Alto stock also gave a solid guidance for the current quarter. Its guidance shows that the company expects its revenue to increase by 21 to 24%.

However, Palo Alto has a chronic problem of increasing expenses. Earnings plummeted by 20% in the quarter. The company has promised to cut its expenses in the coming quarters. However, it is important to note than increased spending means more products and R&D. Palo Alto will launch its Next-Generation Security Platform next year. The company will also release Application Framework in 2018. The SaaS framework will give customers access to Palo Alto’s cloud-based security services and APIs.

In October, investment firm Stephens increased its price target for Palo Alto stock from $155 to $165 and gave it an Overweight rating. The firm said in a report that Palo Alto’s execution and strategy remains strong. In September, Maxim Group increased its price target for Palo Alto Networks from $168 to $195 and issued a Buy rating. Maxim’s analyst Nehal Chokshi said in a note that Palo Alto Networks is a “Best-in-Class” name in the industry.

Earlier this month, famous analyst Jim Cramer said in a program on CNBC that Palo Alto stock should be bought on the current weakness amid the upcoming quarterly report. Cramer is bullish on the stock because he thinks cyber-security is an evergreen industry that will keep growing with the rise in cyber-attacks and digital threats.

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