Shares of Palo Alto Networks Inc. (PANW, Financial) fell 8.45% to $229.14 per share in extended trading on Monday after reporting first-quarter 2020 results.
The Santa Clara, California-based cybersecurity company also issued its earnings and revenue outlook for the second quarter and full fiscal 2020.
The company’s outlook on earnings disappointed the market, sending shares lower in after-hours trading.
Palo Alto Networks is targeting pro forma earnings per diluted share of $1.11 to $1.13 for the next quarter, which is below consensus estimates of $1.3. It expects pro forma earnings per diluted share of $4.90 to $5.00 for the full year, which is also below estimates of $5.07.
Second-quarter revenue is projected to fall in the $838 million to $848 million range versus analysts’ forecasts of $845.12 million. Full fiscal 2020 revenue is expected to be in the $3.44 billion to $3.48 billion range, compared to projections of $3.46 billion.
Concerning results for the first quarter of fiscal 2020, Palo Alto Networks posted pro forma earnings of $1.05 per share, which were down 10.3% year over year but topped estimates by 2 cents.
First-quarter revenue grew 17.7% from the prior-year quarter to $771.9 million, topping analysts’ projections by $2.56 million.
By segment, subscription and support revenue of $540.7 million rose 30.1% compared to the prior-year quarter. In contrast, product revenue of $231.2 million decreased 3.9%.
In a statement,Ă‚ CEO Nikesh Arora commented on the company's performance:
“Palo Alto Networks' multi-platform approach to security is clearly resonating with our customers. Our Next-Gen Security offerings performed extremely well in our first fiscal quarter, bolstering our confidence in our long-term prospects for Prisma and Cortex. At our recent Ignite conference, we introduced significant product enhancements, including Cortex XDR 2.0, SD-WAN and DLP capabilities for Prisma Access and the integration of Twistlock and PureSec into Prisma Cloud, that should sustain this momentum. Additionally, we expect our proposed acquisition of Aporeto, announced today, will further extend our leadership in cloud security.”
Twistlock is a leading company in container security, while PureSec focuses on serverless security.
Aporeto Inc. provides its customers in California with security software solutions, allowing them to set up and operate cloud and native-based applications.
Further, Palo Alto Networks posted an 18% increase in billings to $897.4 million in the first quarter from $760.5 million in the prior-year quarter. The company also noted a 26% increase in deferred revenue to $3 billion.
The balance sheet had $2.86 billion in cash on hand and short-term securities as of Oct. 31. Total debt was approximately $1.45 billion in convertible senior notes, and total equity was worth $1.52 billion.
Shares closed at $250.3 on Monday for a market capitalization of $24.27 billion. After climbing 33% so far this year, the stock is now above the 120-, 70- and 30-day simple moving average lines.
The 52-week range is $165.34 to $260.63. Palo Alto Networks does not pay dividend.
The 14-day relative strength index of 79 suggests the stock is nearing overbought levels.
Wall Street issued an overweight recommendation rating for shares of Palo Alto Networks with an average target price of $266.23 per share.
Disclosure: I have no positions in any securities mentioned.
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