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Palo Alto Networks guidance falls short of estimates; shares slump premarket

Published 02/20/2024, 04:18 PM
Updated 02/21/2024, 06:01 AM
© Shutterstock -- Palo Alto Networks (NASDAQ:PANW) shares slumped in premarket trading on Wednesday after the cybersecurity firm reported current-quarter guidance on Tuesday that missed estimates.

The company said it expects to deliver fiscal third-quarter adjusted earnings per share (EPS) of between $1.24 to $1.26 on revenue of $1.95B to $1.98B. That was below Wall Street expectations for an EPS outlook of $1.29 on revenue of $2.04B. Total billings was guided in the range of $2.30B to $2.35B.

Speaking to analysts following the report, Chief Executive Officer Nikesh Arora flagged that clients are closely watching expenditures on cyber protection after recently shelling out cash to bolster their safeguards against rising digital threats. 

"The customers are demanding to get more for the amount of money they have allocated to cybersecurity," Arora said. However, he noted that demand for its offerings continues to be "very strong."

For its 2024 fiscal year, the company guided for adjusted EPS of $5.45 to $5.55 per share on revenue of between $7.95B to $8.00B. That compared with a prior estimate for adjusted EPS of $5.40 to $5.53 on revenue of $8.15B to $8.20B.

Arora added that 400 customers have also signed up to receive free support services in the event of a breach, a perk that Palo Alto originally offered to 1,500 clients in its first quarter.

Analysts at Piper Sandler said that while this decision helps to create longer-term contracts, it should negatively impact the business for at least the next 12 months -- including a projected elimination of $600 million in billings in Palo Alto's fiscal second half. The Piper Sandler analysts subsequently lowered their rating to "Neutral" from "Overweight" and slashed their price target for the stock to $300 from $350.

Annual billings are now seen at between $10.1B and $10.2B, down from a previous range of $10.7B to $10.8B. Revenue is also anticipated to be between $7.95B and $8B, a reduction from a prior view of $8.15B to $8.2B.

In the three months ended on Dec. 31, California-based Palo Alto Networks posted adjusted profit of $1.46 a share on revenue of $1.98 billion, compared with estimates of $1.30 and $1.97B, respectively. 

Latest comments

Just wait until the next NVIDIA reports come in.......bloodbath!
-20% after market! Best reason to BUY PANW And CRWD and ZS!!
still waaay overpriced, this will drop a lot further
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