Call it great Palo Alto Networks (Banu) guessing game ahead of the cybersecurity firm’s unusual timing to report its fiscal fourth-quarter results. An earnings call for PANW shares is due after the market closes on Friday, and will be followed by an extended call with Wall Street analysts.
Palo Alto stock fell on August 2. That’s when he announced his plan to report the results on the afternoon of August 18th. It is also expected to provide financial projections for 2024, and update medium-term financial goals through 2026.
Palo Alto typically reports on Monday or Tuesday during the fourth week of the month. Rarely, if ever, do companies report once the trading week has ended.
There is more fuel for Wall Street’s anxiety. After Palo Alto’s surprise announcement, The Cont fortinet (FTNT) On August 3, it announced second-quarter results that missed revenue and billings.
This raised investor concerns that bad news is coming for PANW shares. So analysts have lowered estimates heading into the Palo Alto earnings report.
PANW inventories are up 54% for 2023
PANW stock fell 15% in August, but shares have leveled off this week. The stock is still up 54% for 2023.
Wall Street analysts say whether a company beats or misses estimates likely won’t move shares. Some expect its forecast for fiscal year 2024 to fall short of expectations. One of the questions raised is whether its updated financial targets through fiscal 2026 will ease investor concerns about fiscal 2024.
“We are leaning more towards anticipating strategic and operational revelations that will likely take some time to digest, and possibly for analysts to rebuild financial models,” Deutsche Bank analyst Brad Zelnick said in a note to clients.
Alleviating concerns, Palo Alto sent an email to analysts stating: “While not traditional timing, this is an optimal date given other important company events, including the start of sales the following week.”
Zelnick speculates that Palo Alto may “announce that it will no longer sell devices.”
With its roots in the “firewall” network security market, Palo Alto has created an extensive cloud-based security platform. Firewall hardware protects computer networks by blocking Internet intrusions and monitoring Web-based applications.
Palo Alto Stock: Three-Year Targets Updated
Here’s a sampling of what some other Wall Street analysts are saying in their notes to clients ahead of the Palo Alto earnings report.
Shaul Eyal, Analyst at TD Cowen: “In our view, if the new midterm guide on bills is below the consensus 2025 fiscal of $12.7 billion, the bears are likely to point to the relatively high valuation of the stock.”
Keith Bachmann, BMO Capital Markets Analyst: “We believe the focus of this upcoming Friday night’s earnings call will be more fiscal 2024 guide and less quarter. In our view, investor expectations for 2024 guidance metrics include average billings growth and average 30% free cash flow margins.” “.
JPMorgan analyst Brian Essex: “We expect additional detail on a framework for dynamic growth as management aims to double the company over the next three to five years with less reliance on headcount and operating expense growth. We believe management will focus on balancing any weakness with fiscal guidance 2024 with a healthy mid-term outlook.”
“We expect Palo Alto to guide fiscal 2024 revenue roughly in line with the Street, billings/free cash flow just below the Street and EPS above the Street,” said Gabriela Borges, a Goldman Sachs analyst.
In addition, Burgess expects Palo Alto to lower its medium-term outlook for free cash flow margins.
Is the earnings call a risk with the August dip?
Selling PANW shares in August could make the shares less volatile, says Jefferies analyst Joseph Gallo.
“We continue to believe there are some risks as fiscal year 2024 guidance is likely to be significantly challenged and the 2026 FCF consensus feels elevated,” he said in a note.
At Raymond James, analyst Adam Tindle said in his note, “We are lowering our outlook for FCF due to the expectation that management will address a combination of factors that could normalize FCF margin into the low/mid 30% range.”
He added that the updated 2026 target may also move stock.
“Right now, we’ll err on the side of conservatism, but we’re holding on to the stock given our view that the Internet is in a platform cycle and Palu is uniquely positioned to gain share during this time,” Tindle said.
Follow Reinhardt Krause on Twitter @tweet For updates on 5G wireless networks, artificial intelligence, cybersecurity, and cloud computing.
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