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.
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