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Palo Alto Networks ( PANW ) stock rocketed Thursday as the cybersecurity firm’s model of providing a simplified product boosted market-share gains and helped fiscal Q2 results as well as Q3 sales guidance top projections. For its fiscal Q2 ended Jan. 31, Palo Alto’s earnings per share soared 110.5% to 40 cents, beating estimates by a penny. Sales jumped 54% to $334.7 million, above views of $318.3 million. Both measures, however, decelerated for the second consecutive quarter. Shares closed up 9.7% and rallied another 4% in after-hours trading. Customers aren’t interested in puzzle-piecing together their security solution, CEO Mark McLaughlin said on a conference call. That platform focus drove Palo Alto to add 2,000 new customers to its 30,000-strong client base. He also noted a “paradigm shift” from reactive security to the platform. ‘Buying All Elements’ “People are not interested in adding one more agent onto the endpoint,” he said. “So simplified on the endpoint is a driver and it’s very analogous to when people say, ‘Hey, I don’t want firewall and plus, plus, plus (more products).” Billings also surged 62% to $459 million during Q2 as customers began “buying all elements of our platform,” CFO Steffan Tomlinson said on the call. Subscription revenue of $84.3 million grew 68% vs. the year-ago quarter. “We’re seeing customers standardizing on our platform,” McLaughlin said. And with that, “they’re adopting a lot more subscription services than they have in the past.” Current-quarter sales guidance for $335 million-$339 million topped analyst forecasts for $334.9 million, but Palo Alto’s EPS ex items outlook for 41-42 cents missed Wall Street expectations for 45 cents. The company’s Q3 sales would be up 44% at the midpoint of guidance, and EPS ex items would rise 80% at the midpoint. But both metrics would also decelerate for the third consecutive quarter. On a seasonal basis, Q1 and Q3 tend to be weaker, Tomlinson said. While McLaughlin said security remains a top priority globally, IBD’s 41-company Computer Software-Security group has fallen 20% year to date. Over the same time period, Palo Alto Networks stock has lost 26%. McLaughlin acknowledged the stock shake-up — likely related to disappointing guidance from tech firms like Tableau ( DATA ) and LinkedIn ( LNKD ) — but said there’s nothing to indicate the macro environment will play out along stock market lines. Taking Market Share Palo Alto also appears to be swiping market share from Cisco ( CSCO ), Check Point Software Technology ( CHKP ), Fortinet ( FTNT ) and Juniper Networks ( JNPR ), McLaughlin said. Of the $300 million in added 2015 revenue across the five vendors, Palo Alto accounted for $120 million. “The average is $58 million,” he said. “I think it’s very obvious we’re taking share from everyone in the space for the math to work out that way.” During Q2, Palo Alto also announced a data-sharing partnership with Proofpoint ( PFPT ), similar to a deepened IBM ( IBM )-Check Point alliance unveiled Thursday. The Palo Alto-Proofpoint alliance will drive automated and coordinated protection across Palo Alto’s platform, Proofpoint’s targeted attack protection and SocialPatrol. The Big Picture Customers are fed up with cybersecurity vendors that try to monetize data threat intelligence, McLaughlin said. “The big picture is the way we monetize intelligence is in the platform itself,” he told analysts. “The more intelligence we have in the platform, the better job we do. And we have an insatiable desire for platform intelligence.” He added: “You better be able to take intelligence and put it in your platform, and do something with it. That’s where the value will lie.” Scalper1 News
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