Palo Alto Networks Inc. (NASDAQ:PANW) has experienced a significant rally over the past two weeks, driven by strong results from cybersecurity peers Fortinet Inc. (NASDAQ:FTNT) and Check Point Software Technologies Ltd. (NASDAQ:CHKP), along with a broader rebound in equity markets. The stock has surged 16% since August 5, yet it remains below its all-time high set in January. The recent performance comes on the heels of a revenue forecast cut in February, which raised concerns about reduced user spending.
Platformization Strategy and Investor Expectations
Palo Alto Networks is shifting towards a “platformization” strategy, aiming to bundle its services. This approach is seen as a smart long-term move, but Jamie Meyers, a senior equities analyst at Laffer Tengler Investments, notes that Wall Street’s short-term reaction has been mixed. Meyers is focused on the company’s ability to secure large deals, increase platformized customer numbers, and provide a solid outlook. Palo Alto Networks is scheduled to report its earnings on Monday after the market closes.
Impact of CrowdStrike’s Software Outage
Another critical aspect is the fallout from CrowdStrike Holdings Inc.’s (NASDAQ:CRWD) software update failure, which caused a significant IT disruption globally. Investors are keen to hear whether Palo Alto Networks has capitalized on the customer churn resulting from this incident. Irene Tunkel, chief US equity strategist at BCA Research Inc., emphasizes that all eyes will be on Palo Alto’s response and its potential to gain market share in the wake of CrowdStrike’s troubles.
Quarterly Revenue and Growth Expectations
For its fourth-quarter report, Palo Alto Networks is expected to generate revenue of approximately $2.2 billion, marking an 11% increase from the previous year. However, this would represent the fourth consecutive quarter of slowing growth. Billings are projected to be around $3.5 billion, up about 10% year-over-year. Analysts are divided on the company’s future performance, with concerns about competitive positioning and the effectiveness of its new strategy.
Analysts’ Sentiment and Future Outlook
The company’s future outlook will be closely scrutinized. Analysts are cautious due to previous poor results and the potential impact of its strategic shift. According to JPMorgan analysts led by Brian Essex, a slowdown in billings, revenue, and free cash flow could limit short-term share-price gains. Evercore ISI analysts, led by Peter Levine, suggest that the fourth quarter might serve as a “clearing event” to adjust expectations, potentially offering better buying opportunities after the earnings report.
Conclusion
If Palo Alto Networks can deliver strong future projections and show it has benefited from the CrowdStrike fallout, it may see an uplift in investor sentiment. As Stifel analyst Adam Borg notes, while near-term challenges exist, he remains bullish on the stock. The upcoming earnings report will be crucial in determining whether Palo Alto Networks can sustain its recent rally and address investor concerns effectively.
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Author Faith Yakubu 
