Will Palo Alto Networks Keep Suffering Post-IPO Blues?

On Thursday, Palo Alto Networks (NYSE: PANW  ) will release its latest quarterly results. Since going public last summer, the company has given back all of its initial surge following its IPO, with shares giving up a quarter of their value.

The popularity of the big data movement in the technology sector has created major opportunities for companies new and old, and Palo Alto has sought to earn a valued place in the industry with its security products. As more data flows through the Internet, securing it from unwanted predators will only get more important. Let's take an early look at what's been going on at Palo Alto Networks over the past quarter and what we're likely to see in its quarterly report.

Stats on Palo Alto Networks

Analyst EPS Estimate

$0.05

Year-Ago EPS

$0.01

Revenue Estimate

$103.46 million

Change From Year-Ago Revenue

57%

Earnings Beats in Past 4 Quarters

3*

Source: Yahoo! Finance. *Since going public three quarters ago.

Will Palo Alto Networks get out of its stock slump this quarter?
Over the past few months, analysts have been fairly stable in their views on Palo Alto, keeping April-quarter earnings estimates but boosting fiscal 2013 and 2014 prospects by $0.01 per share. The stock, though, has continued its downward move, falling almost 15% since the end of February.

Palo Alto has huge appeal to tech investors despite its recent share-price setback. The rise in cyber-attacks on government and commercial websites and networks has refocused attention on the need for cybersecurity, and Palo Alto aims to provide the most up-to-date protection available by using cloud-based updates and upgrades to its security suite rather than building them directly into hardware solutions.

Palo Alto faces huge competition, both in the form of Cisco and other major networking companies as well as specialists Check Point Software (NASDAQ: CHKP  ) and Fortinet. But Palo Alto hasn't let that stop it from moving forward with interesting new products. For instance, last November, the company released its next-generation virtual-data-center firewall, which works alongside cloud-computing giant VMware's (NYSE: VMW  ) products to secure data on virtual networks. Beyond helping Palo Alto directly, the firewall should also enhance the value of VMware's virtualization products, potentially accelerating the movement toward cloud computing.

Given Palo Alto's huge growth recently, some analysts believe it's a logical takeover candidate in the hot industry. Check Point Software has seen sluggish growth lately, and buying Palo Alto would help it reinvigorate its upward trajectory and keep up with its own competition. Meanwhile, VMware would make a reasonable buyer for the company as well if it decided that it wanted to provide its own vertically integrated proprietary network security into its products.

In Palo Alto's earnings report, watch to see if the company can keep its aggressive growth rate up. With Fortinet having recently guided revenue and earnings downward last month, Palo Alto needs to avoid the same trend if it wants to sustain its premium valuation.

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