PAN stock pressured by earnings outlook

PAN stock pressured by earnings outlook

August 18, 2020 0 By admin

Decline lessens during conference call, as CEO discusses opportunities in wake of massive SolarWinds hack 

Palo Alto Networks Inc. shares declined in the extended session Monday after the company’s earnings outlook fell short of the Wall Street consensus despite high hopes for the cybersecurity industry in 2021.

Palo Alto Networks forecast adjusted earnings of $1.27 to $1.29 a share on revenue of $1.05 billion to $1.06 billion for the fiscal third quarter, and $5.80 to $5.90 a share on revenue of $4.15 billion to $4.2 billion for the year. Analysts surveyed by FactSet had estimated $1.29 a share on revenue of $1.05 billion for the third quarter, and $5.79 a share on revenue of $4.12 billion for the year.

It appears, however, that some of the initial sting was taken out during the company’s conference call, when Chief Executive Nikesh Arora talked of opportunity in the wake of a massive hack. Shares of Palo Alto Networks PANW, -3.16%, which had been down nearly 6% after hours, improved to being down just 1.5% following the call. Shares closed down 3.2% in the regular session to finish at $384.45.

“The SolarStorm attack highlighted enterprises need a comprehensive up-to-date map of their full IT infrastructure environment, including understanding their own networks as well as external attack surfaces and supply chains,” Arora said on the conference call. 

The SolarStorm attack refers to hackers compromising SolarWinds Corp.’s SWI, +0.88% Orion IT software, which was discovered in December and affected a wide swath of corporate and government users, prompting many organizations to quickly update their networks. Last week, the White House announced that President Joe Biden would address the attack in an upcoming executive action.

“We expect that this attack will be a wakeup call to all enterprises to modernize cybersecurity and will serve as a net incremental tailwind, not just for us but also for the industry,” Arora said.

The company reported a fiscal second-quarter loss of $142.3 million, or $1.48 a share, compared with a loss of $73.7 million, or 75 cents a share, in the year-ago period. Adjusted earnings, which exclude share-based compensation charges and other items, were $1.55 a share, compared with $1.19 a share in the year-ago period. Revenue rose to $1.02 billion from $816.7 million in the year-ago quarter.

Analysts surveyed by FactSet had forecast earnings of $1.43 a share on revenue of $985.6 million, based on the company’s estimate of earnings of $1.42 to $1.44 a share on revenue of $975 million to $990 million. 

Billings, which reflect future business under contract, rose to $1.21 billion, up from $999 million a year ago, while analysts had forecast billings $1.18 billion.

The company also kept up its practice of growing through acquisitions. Last week, Palo Alto Networks said it would buy cloud-security company Bridgecrew for $156 million.

Palo Alto Networks shares are up 58% over the past 12 months. In comparison, the ETFMG Prime Cyber Security ETF HACK, -2.33% is up 35%, the S&P 500 index SPX, -0.77% is up 16%, and the tech-heavy Nasdaq Composite Index COMP, -2.46% is up 41% over that time.