Palo Alto Networks (PANW ) is a cyber security company that has been on the up-and-up over the past few months. With its earnings report due out June 4, will this current Zacks Rank #3 (Hold) option outperform expectations or fall flat? Let’s take a closer look.
Palo Alto’s stock has steadily increased 92.9% since April 2017, following a two-year volatile downfall. In the past three months alone, the stock has run up 21.2%, reaching an all-time high price of $211.71 per share, making investors anxious as to whether they should invest now or wait.
The company has seen strong success due to an increase in cyber-attacks worldwide, forcing other companies to switch from old grade technology to new.
On top of this, the company’s acquisitions of companies like LightCyber and Morta Security are helping to back its remarkable increase in revenue, whilst also improving overall functionality and technology of its solutions.
Palo Alto’s “A” grade in the Growth and Momentum categories of our Style Scores system show how its success is pushing it through the ranks. Its most startling statistics lie in its projected EPS growth, which sits at 43.4% for the full year, more than twice the industry average 20.9%. That being said, because of its success, its Value rating, a “D” grade at the moment, indicates a slight inflation of share prices.
Our Zacks Consensus Estimates put Palo Alto Q3 2018 revenue at $545.7 million (+26.4% year over year) and earnings at $0.96 per share (+57.4%). Q3 estimates have trended strongly upwards throughout the quarter, showing that analyst sentiment surrounding this quarter has improved.
Of course, there is always the concern that this hot cyber security star may run out of juice soon if a new product is not released, or if certain costs are not reduced. Investors are also afraid that this wave of increased cyber security interest has boosted business for now, but once it ends, will the company’s shares hold up?
Regardless, Palo Alto looks poised to have a strong earnings report in Q3. Riding a more than a year’s worth of steady momentum, and just recently reaching an all-time high, the company is certainly on a hot streak.
Still, Palo Alto’s intense overhead costs and possible industry headwinds could cause volatility at some point, so perhaps it is in the best interest of investors to wait and observe until after the earnings release.
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