'Momentum Uninterrupted' At Palo Alto, According To Oppenheimer

In a new report, analysts at Oppenheimer laid out their bullish case for Palo Alto Networks Inc PANW based on their most recent round of channel checks. The report includes several reasons why analysts believe that Palo Alto’s stock is primed for a climb in upcoming months.
Tracking above guidance
Oppenheimer’s most recent channel checks indicate that Palo Alto’s fiscal Q3 revenue numbers are tracking higher than its mid-point guidance of $221 million. Approximately 90 percent of contacts indicated that their Palo Alto business is beating expectations for the quarter. Analysts now see the full-quarter number coming in between $221.3 and $223.0 million with “highly likely” upside to their $0.20 earnings per share (EPS) estimate for the quarter.
Subscription growth
According to the report, analysts believe that Palo Alto’s five subscription services provide the company with “significant competitive advantages.” Analysts predict subscription revenue growth upwards of 50 percent and feel that the strength of services such as Wildfire and Traps will continue to drive the stock higher in the future.
Outlook
Oppenheimer is calling for overall fiscal year 2015 revenue of $866.1 million, up 44.8 percent Y/Y. In addition, analysts see channel expansion, customer penetration and demand for cutting-edge solutions drivin g company guidance higher for the remainder of 2015. In the long-term, they expect the company’s margins to continue to expand to the 20 percent range.
Takeaway
Oppenheimer has an Outperform rating on Palo Alto and a $175 price target on the stock. Palo Alto is expected to report earnings on May 27 after the market closes.