Stock (Symbol) |
Palo Alto Networks (PANW) |
Stock Price |
$113 |
Sector |
| Technology |
Data is as of |
| April 2, 2017 |
Expected to Report |
| May 24-30 |
Company Description |
 PANW security platform consists of three elements: its Next-Generation Firewall, its Advanced Endpoint Protection, and its Threat Intelligence Cloud. The Company’s Next-Generation Firewall delivers application, user, and content visibility and control, as well as protection against network-based cyber threats integrated within the firewall through its hardware and software architecture. Its Advanced Endpoint Protection prevents cyber-attacks that aim to exploit software vulnerabilities on a range of fixed and virtual endpoints and servers. The Company’s Threat Intelligence Cloud provides central intelligence capabilities, security for software as a service (SaaS) applications, and automated delivery of preventative measures against cyber-attacks. Source: Thomson Financial |
Sharek’s Take |
 I have been giving a lot of thought to Palo Alto Networks (PANW). After the company reported profits last qtr that met analyst estimates, management slashed profit guidance which caused the stock to dive from around $155 to $115. But still — even with the lower guidance– PANW is expected to have 31%, 48%, 24% and 22% profit growth during the next 4 qtrs which is good. So do I sell because estimates were slashed — 2017’s figure dropped from $2.78 to $2.48 — or should I hold as profits are still expected to grow at a fairly rapid rate? Palo Alto is one of the best cyber-security companies in the world, with a platform that only allows registered users into a company’s computer system (like a bouncer would keep people out and only let in a select few at a nightclub door). Palo Alto used to have the industry’s best cyber software, but now Cisco Systems looks to be doing a better job of getting business, and that’s what really has investors concerned. So what should I do? Hold or Sell? Since the company just lowered estimates I feel it could lower once again and that could send the stock tumbling once more. Thus, the certainty factor is gone. Also, PANW just broke support at $120 and has stayed below that mark, which is not a good sign. In the end, this is no longer one of the top growth stocks in the market, thus I will sell the shares from the Growth Portfolio and keep Palo Alto on the radar to perhaps buy again at a later date. |
One Year Chart |
 This chart doesn’t look good — at all. If the stock would have held at $120 once could argue it’s hitting support levels. But the break to $110 is a real negative. But profit growth is still good, right? If this stock had a P/E of 30 then one could assume the stock has upside. But the P/E is still 45. Annual Profit Estimates were reduced as follows: 2017 from $2.78 to $2.48, 2018 from $3.71 to $3.20, and 2019 from $4.83 to $4.18. |
Fair Value |
 My Fair Value is 40x earnings, but honestly I could have made it 35 times. Even with a 40 P/E I see the stock being overvalued by 12% right now. Also, there’s no certainty that PANW will deliver these profits — the company could lower again next qtr. |
Bottom Line |
 Palo Alto was once considered to be the best cyber-security stock to own. But now the chart has taken a turn for the worse as profit estimates got slashed. Although profit growth is expected to be good for the rest of the year, who’s to say the company won’t warn again next qtr? Also, the stock hovering around its 52-week low is a bad omen. I will sell PANW from the Growth Portfolio and keep the stock on the radar. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
1 thought on “What To Do With Palo Alto Networks?”
Comments are closed.
Pingback: Palo Alto Beats After Shaking out Investors – School of Hard Stocks