Strong Quarters From Cisco, Check Point May Be Positive For Palo Alto

Palo Alto Networks Inc PANW is scheduled to report its fiscal second-quarter 2017 results on Feb. 28. Strong results from industry peers in network security, Cisco Systems, Inc. CSCO and Check Point Software Technologies Ltd. CHKP, indicate “broad-based market demand,” Imperial Capital's Michael Kim said in a report.

Kim maintains an Outperform rating on Palo Alto, with a price target of $180. The analyst expects the company to report strong growth, backed by solid security demand and higher adoption of subscription services.

FQ2 Preview

For the second quarter, Cisco reported 14 percent year-over-year growth in its security business to $528 million and 45 percent year-over-year growth in its deferred revenue. The company added more than 6,000 new customers during the quarter. Check Point Software reported 6 percent year-over-year growth in revenue to $487 million for Q4 2016, with 26 percent year-over-year growth in software blade subscriptions.

Kim expects Palo Alto to report revenue of $429 million and adjusted EPS of $0.62, in line with consensus estimates.

Related Link: Palo Alto Gains Market Share; Growth Approach Should Push Shares Higher

Favorable Trends

The RSA Conference held in San Francisco in mid-February highlighted positive security spending trends due to “escalating attacks and critical need for more effective defenses,” the analyst wrote. These trends would favor Palo Alto’s integrated platform, which “spans from the network perimeter to the endpoint.”

Terming Palo Alto as a top-tier vendor in the cybersecurity section, Kim commented that the company could continue to gain market share in coming quarters, driven by its newer subscription services.

At Last Check

• Check Point shares were down 1.67 percent at $98.14 in Friday's pre-market session.
• Cisco shares were down 0.82 percent at $33.76.
• Palo Alto was down 0.03 percent at $152.70 in Thursday's after-hours.