Palo Alto Networks Inc. Earnings: Will Cyberattacks Secure Future Growth?

On Wednesday, Palo Alto Networks (NYSE: PANW  ) will release its quarterly report, and investors have been excited at the prospects for the network-security company in light of all the cyberattack activity that has occurred in the past several months. But with Intel's (NASDAQ: INTC  ) McAfee, Symantec (NASDAQ: SYMC  ) , and a host of other companies aiming to take full advantage of the need for greater Internet and network security, Palo Alto Networks will have to work hard to demonstrate its superiority over its rivals.

Palo Alto Networks has been public for less than two years, but the company has already made a big impression in the security sector. Still, IPO investors haven't seen huge returns on their investment, and over the past couple of months, the high-flying stock came falling back to earth as shareholders questioned the sustainability of Palo Alto's growth trajectory. Still, the key question is whether Palo Alto can top Symantec, Intel's McAfee, and other key players to keep its revenue and earnings climbing. Let's take an early look at what's been happening with Palo Alto Networks over the past quarter and what we're likely to see in its report.


Source: Palo Alto Networks.

Stats on Palo Alto Networks

Analyst EPS Estimate

$0.10

Change From Year-Ago EPS

67%

Revenue Estimate

$146.21 million

Change From Year-Ago Revenue

44%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can Palo Alto Networks earnings stay attractive?
In recent months, analysts have pulled back on their views of Palo Alto earnings, cutting a penny per share from their April-quarter estimates and reducing full-year fiscal 2014 and 2015 projections by 10% and 20% respectively. The stock has given back some of its gains from the past year, falling 8% since late February.

Source: Palo Alto Networks.

Palo Alto Networks' fiscal second-quarter earnings report in February showed the extent to which the company has cashed in on demand for security products. Sales jumped 46% overall on a 74% rise in subscription and services revenue, and adjusted net income almost doubled from the year-ago quarter. Palo Alto Networks noted that high demand for its integrated enterprise security platform, and its success of its subscription-based model has contributed to solid billings numbers as well as impressive cash flow gains.

In large part, Palo Alto Networks' success has come at the expense of its rivals. Symantec dismissed its CEO back in March, as the company still relies largely on a license-based model and is too focused on the slower-growth PC-security area. Similarly, Intel and McAfee are still arguably best known for their PC-related products. By contrast, Palo Alto's biggest strength is its exposure to the faster-growing network-security and mobile-security areas, and it hasn't hesitated to grow to serve its customers better. For instance, Palo Alto recently opened a Singapore-based cyber-security lab to meet demand for firewall products in the Asia-Pacific region.

Best of all, the surge in cyberattack activity has refocused enterprise efforts on network security. After the emergence of the Heartbleed virus and numerous targeted attacks on retailers and other companies, analysts have seen that Palo Alto's products and services have become more popular among enterprise clients. With no sign that the danger is easing, Palo Alto Networks has some investors believing that its growth could accelerate in the near future.

In the Palo Alto Networks earnings report, watch to see the extent to which the company has captured greater interest as a result of recent cyberattacks. As cyber-criminals get more sophisticated in their efforts to penetrate defenses, it'll be even more important for companies to seek out the services that Palo Alto provides, and that could sustain Palo Alto Networks' growth for the foreseeable future.

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