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Why Palo Alto Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Palo Alto Networks (NYSE: PANW  ) have fallen 10% today after the company reported a GAAP net loss and offered weak forward guidance for its fiscal fourth quarter.

So what: Palo Alto's report wasn't entirely bad -- although revenue of $101.3 million missed the $103.4 million Wall Street consensus, it was still 54% higher year over year, and adjusted quarterly earnings of $0.06 per share actually beat expectations by $0.01. However, GAAP losses of $0.10 per share and guidance that fell below consensus on top and bottom lines spooked the market. Palo Alto now thinks it will earn $0.06 per share in adjusted profit on $106 million to $110 million in revenue, which is below the $0.07 per share on $113.7 million consensus Wall Street was looking for.

Now what: JMP Securities reduced its price target from $77 to $60, but still rates Palo Alto as a buy at today's prices. However, investors will need to tread with caution, as Palo Alto's guidance gives the appearance of some difficulties in expanding its profit even as revenue grows. A lack of forward earnings momentum stalls most stocks, and Palo Alto might not have the cachet to rise on the strength of its sales alone.

Want more news and updates? Add Palo Alto Networks to your watchlist now.

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Alex Planes

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.

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Related Tickers

5/23/2016 4:02 PM
PANW $143.97 Up +2.21 +1.56%
Palo Alto Networks CAPS Rating: ***