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Why Investors Should Hold On To Palo Alto (PANW) Stock Now?

Zacks

Of late, shares of Palo Alto Networks Inc. PANW have been on an upswing. The stock has been on a bullish run, appreciating 28.5% in the year so far. It crafted a 52-week high of $187.07 during yesterday’s trading session. Over the past year, the stock has rallied 61.9%, significantly outperforming its industry’s gain of 27.9%.

A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.

And we believe Palo Alto Networks is one such stock that investors need to hold on to right now. Though there are a few short-lived concerns regarding the stock, it has the potential to perform well over the long haul.



What’s Driving the Stock?

The stock has a fantastic record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 11.3%. In its last earnings report on Feb 26, 2018, Palo Alto Networks reported revenues and non-GAAP earnings per share (EPS) of $542.4 million and 86 cents, respectively. Quarterly revenues and earnings both outpaced the respective Zacks Consensus Estimate and marked significant year-over-year improvement as well.

Following the robust quarterly results, the stock has seen upward earnings estimate revision for the current quarter as well as the fiscal. For the current quarter, Palo Alto Networks is expected to post EPS of 95 cents on $545.8 million of revenues. This represents a 55.7% change in EPS on a 26.4% change in revenues. For the current fiscal, the company is expected to earn $3.86 per share on $2.21 billion of revenues. This represents changes of 42.4% and 25.7%, respectively.

Other Growth Drivers

Palo Alto Networks is growing rapidly in the cybersecurity space on the back of its innovative next-generation security platforms. Over the last two years, the company launched several subscription-based products, including WildFire, AutoFocus, Aperture, Traps and Virtual, which have been witnessing strong adoption among organizations.

The company’s innovative product portfolio and continued efforts to enhance the same with advanced features helps Palo Alto win new deals. Notably, during second-quarter fiscal 2018, the company added nearly 3,000 customers, bringing the total to more than 48,000 worldwide. It should be noted that in each of the last 24 quarters, Palo Alto has added at least 1,000 customers.

Furthermore, acquisitions have been one of the key strategies of Palo Alto to enhance its product portfolio as well as expand the company’s global reach. Last year, it acquired LightCyber for $105 million, which expanded its Next-Generation Security Platform. Over the past few years, the company has completed three important buyouts — Morta Security, Cyvera and CirroSecure.

Additionally, the company is keen on expanding its cloud exposure through partnerships. It has existing cloud partnerships with companies like Amazon’s AMZN Amazon Web Services and Alphabet’s GOOGL Google Cloud. In August 2017, the company expanded its ties with VMware, Inc. VMW.

Bottom Line

Keeping these positives in mind, we feel Palo Alto Networks is one such technology stock that deserves a place in investors’ portfolio. We can essentially filter the negatives and focus on the positives which drive its shares.

Palo Alto Networks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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