Palo Alto's Q3 Bounce Back Is Just The Beginning

Palo Alto Networks Inc (NYSE: PANW) had a strong third quarter, beating the Street estimates on several metrics:

• Non-GAAP EPS: $0.61 vs. $0.55 estimate by Jefferies analyst John DiFucci.
• Total revenue: $431.8 million vs. $412.1 million.
• Product revenue: $164.2 million vs. $146.7 million.
• Services revenue: $267.6 million vs. $265.3 million.

Analyst's Take

Palo Alto gave itself a low bar to hurdle in setting Q4 guidance, but DiFucci said the company’s bounce back from a decline in the previous quarter will continue.

“We expect business momentum to continue to improve from here, though that’s not what’s implied in what may prove to be conservative guidance,” said DiFucci.

The analyst estimates $485.9 million in revenue for Q4, bringing the fiscal 2017 estimate to $1.74 billion with a non-GAAP EPS of $2.58.

“We believe that the guidance is likely prudent considering the company’s on-going product cycle, sales re-alignment activities, and likely uncertainty around the impact of a new OS required with the new products,” said DiFucci.

Jefferies gives Palo Alto a Buy rating, with a price target raised from $150 to $155.

At last check, shares of Palo Alto shares were up 16.69 percent at $138.25.

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