Analyst On Palo Alto: '#Winning'

Pacific Crest's Rob Owens maintained an Overweight rating on Palo Alto Networks Inc (NASDAQ: PANQ), with a price target of $190.

Palo Alto continues to perform well with its platform solution finding favor with customers and driving meaningful market share gains. The company's shares trade at a discount to comparable growth companies and there are potential upside drivers from the new subscription based services, analyst Rob Owens said.

Palo Alto reported better-than-expected 2Q revenue growth of 54 percent and billings growth of 62 percent, driven by large share gains, despite the underlying scale of its business. The company's robust performance is driven by the success of its core offering, new add-on solutions, virtual solutions and in end-point aided acquisition of 2000 new customers.

Owens mentioned that the company's billing outperformance weighs on its operating margin outlook. "Palo Alto has massive growth at scale with no signs of meaningful slowing. We are buyers of PANW."

The Pacific Crest report noted, "Billings strength and in particular success with new sales of subscription services weighed on operating margin and forward margin targets in the January quarter. This is due to in-period commission payments paid on a billings event that has revenue recognition over time."

Palo Alto's subscription revenues could be a major growth contributor in 2016 as the advanced persistent threat [APT] revenue expands, Owens commented.