Key Points
Q4 revenue rose 16% to $2.54 billion; adjusted EPS of $0.95 beat the $0.88 consensus.
Guidance for its upcoming quarter and the full year also came in above Wall Street’s expectations.
A major acquisition could help the company continue to consolidate into a one-stop shop for cybersecurity.
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Shares of Palo Alto Networks (NASDAQ: PANW) are spiking on Tuesday, up 4.8% as of 12:12 p.m. ET. The jump comes as the S&P 500 and Nasdaq Composite have lost 0.4% and 1%, respectively.
Palo Alto Networks, the dominant cybersecurity company, reported its year-end and fourth-quarter earnings, beating Wall Street’s targets and signaling strong growth ahead.
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Palo Alto Networks’ stock jumps on earnings beat and raised outlook
The company’s Q4 revenue jumped 16% year over year, reaching $2.54 billion. It earned an adjusted $0.95 per share, beating Wall Street’s target of $0.88 per share for the quarter.
While last quarter’s performance was impressive, investors were even more pleased to see the company set guidance above Wall Street’s already healthy expectations. Palo Alto is forecasting $2.45 billion to $2.47 billion in sales for its current quarter, above consensus expectations of $2.43 billion. In the same period, it expects to earn $0.88 to $0.90 per share, above the consensus $0.85.
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CyberArk deal part of building a one-stop cybersecurity platform
Analysts across Wall Street maintained or raised their ratings for the stock, excited by what they saw. The company is already the biggest pure-play cybersecurity stock and is looking to solidify this with a $25 billion acquisition of CyberArk Software that will help it become a one-stop shop for cybersecurity.
William Blair analyst Jonathan Ho said of the move, “The company’s approach makes sense given the desire by customers to consolidate vendors and move away from the large number of solution providers they have grown accustomed to.”
The approach is somewhat risky in that, traditionally, as Mr. Ho alludes to, cybersecurity customers have been wary of moving to a single platform due to security and pricing concerns. It does, however, present a major opportunity if it pans out, and early signs point to it doing so.
Cybersecurity is a critical component of doing business and is likely to become even more so as attacks get more sophisticated and systems become more integrated, exposing them to more risk. Palo Alto is positioned to take advantage of this, and I would recommend the stock despite its hefty valuation.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
