Sell-Side Roundup: Analysts Feeling Thankful For Palo Alto Networks

Palo Alto Networks Inc PANW investors are used to turbulence in 2017, and they got even more of it Tuesday after the company impressed Wall Street with its first quarter earnings report. A number of analysts have weighed in on Palo Alto following an EPS and sales beat. Here’s a rundown of what they had to say.

Voices From The Street

KeyBanc analyst Rob Owens said Palo Alto investors have plenty to be thankful for this Thanksgiving. “With easy comps in the next two quarters and our belief in a firewall refresh cycle in 2018, we are raising estimates and continue to favor PANW,” Owens said.

Maxim analyst Nehal Chokshi said the ratio of subscription revenue-to-installed base size is a bullish sign. “Between the sales productivity trend and product revenue y/y growth being guided to a deceleration despite comps continuing to ease, we believe guidance is likely conservative,” Chokshi said.

J.P. Morgan analyst Sterling Auty said the first quarter numbers were much better than many investors had feared. “The product revenue upside in the quarter shows that customers are still interested in firewall investment, especially as part of an increasing firewall refresh cycle for PANW, and as part of a broader platform,” Auty said.

BMO Capital Markets analyst Keith Bachman said there are still concerns for Palo Alto investors, but the recent quarter demonstrates that the company is outperforming its peers. “We believe the forces at work that helped PANW's growth include a broadening revenue portfolio, improved go-to-market execution and product upgrade cycle,” Bachman said.

Credit Suisse analyst Brad Zelnick said Palo Alto's fiscal 2018 billings guidance isn’t particularly impressive. “We believe investors should appreciate the decreasing deferral rate which flatters the P&L, and instead focus on billings, which are largely in line and benefiting from duration,” Zelnick said.

Jefferies analyst John DiFucci said Palo Alto’s momentum is swinging in the right direction. “New business metrics improved for the second consecutive quarter, including 5 percent growth in New Workload Products Sales (excluding our estimate of refresh sales), a 1 percent decline in New Subscription ACV (Annual Contract Value), and 2 percent growth in New Product ACV,” DiFucci said.

Deutsche Bank analyst Karl Keirstead said he’s unexcited about the outlook for firewall demand, but it’s hard to argue with Palo Alto’s quarter. “Bottom line, PANW deserves credit for good sales execution in a tougher overall firewall market and for achieving a material lift from its new appliances at higher-than-expected price points,” Keirstead said.