Palo Alto Setting Up Nicely Into Q1 As Market Share Gains Continue

Barclays likes the set up of Palo Alto Networks Inc (NYSE: PANW) ahead of the cybersecurity firm’s first quarter report on November 21, as it believes the Street’s billings estimate could be conservative. Street expects earnings of $0.53 a share on revenue of $400.2 million.

In the last quarter, Palo Alto grew billings 45 percent, which led the brokerage to forecast 43 percent growth in the first quarter, or $556 million.

“The Street is lower at ~$525M, so we could see a nice beat. Carrying that further, billings upside should take FCF estimates up and that is what should drive price targets, in our view,” analyst Saket Kalia wrote in a note.

Kalia has an Overweight rating on the stock, with a price target of $200.

Meanwhile, the analyst said product revenue would be another key focus for investors as the company faces tough comparisons in the first half of 2017, which should grow slower than the second half due to comparables, refresh, and service provider. The company guided to product revenue growth of 12-13 percent for FY 2017.

Further, Kalia expects to hear more about TRAPS after Palo Alto earned certified anti-virus replacement status just after reporting fourth quarter. It seems the company is also gaining share as a recent IDC report on network security shows Palo Alto continued to gain share in 2015 with 2.6 points of gain versus 2.1 points in 2014.

Separately, JMP Securities analyst Erik Suppiger Cisco Systems, Inc.'s (NASDAQ: CSCO) upgrading of its installed base from its traditional firewalls to next-generation firewalls creates opportunities for other firewall vendors, such as Palo Alto Networks to penetrate Cisco’s accounts.

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