Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Palo Alto Networks, Inc. Stock Climbed 15.9% in 2017

By Steve Symington - Jan 17, 2018 at 1:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite some sales hiccups early on, the leader in next-gen security platforms just capped a stellar year.

What happened

Shares of Palo Alto Networks Inc. ( PANW -2.70% ) climbed 15.9% in 2017, according to data from S&P Global Market Intelligence, after the next-gen security-platform company resolved execution issues early in the year to repeatedly beat Wall Street's expectations.

Palo Alto networks had a rough start to 2017, falling nearly 30% in the month of March alone on the heels of a weaker-than-expected quarter. For that, CEO Mark McLaughlin blamed "go-to-market execution issues" as the company overcomplicated its sales account coverage with too much market segmentation.

In response, however, Palo Alto Networks also insisted the issues were temporary, and promptly reorganized its account coverage model as well as investments in sales and marketing.

Metal padlock sitting on top of circuit board

IMAGE SOURCE: GETTY IMAGES.

So what

The stock all but recouped those early losses the following quarter, with shares rising nearly 13% in the month of June after the Palo Alto Networks announced record revenue and the second-highest number of new customers in company history.

"The integrated and highly automated prevention capabilities of our next-generation security platform continue to differentiate us in the market as we help our customers protect our digital way of life," McLaughlin added at the time.

Perhaps most important, Palo Alto Networks' sales reorganization appeared to be having the desired effect, putting its execution issues firmly in the past. In late August, the company confirmed another better-than-expected quarter after adding 3,000 new customers to its base -- its highest-ever number in any given period -- causing the stock to pop another 10% in a single day.

Now what

Most recently in November, Palo Alto Networks sustained its momentum by once again beating quarterly expectations and raising its full fiscal-year guidance. Revenue last quarter climbed 27% -- well above the rates of its industry peers -- and Palo Alto Networks added another 2,500 customers to bring its total to over 45,000.

For perspective, Palo Alto should be slated to release its next quarterly results in late February. When it does, investors will be comparing those figures to its latest guidance, which calls for revenue to climb 23% to 25% (to a range of $518 million to $528 million), and for adjusted earnings per share in the range of $0.78 to $0.80.

Given its recent habit of underpromising and overdelivering -- and barring a repeat of last year's early sales execution issues -- I won't be the least bit surprised if that guidance proves conservative.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Palo Alto Networks, Inc. Stock Quote
Palo Alto Networks, Inc.
PANW
$520.86 (-2.70%) $-14.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.