Palo Alto Networks jumps as Wells Fargo calls Q3 results ‘solid,’ praises outlook

Palo Alto Networks (NASDAQ:PANW) shares rose more than 7% in mid-day trading on Wednesday after the cybersecurity company posted third-quarter results that were deemed “solid” by investment firm Wells Fargo amid an uncertain economy.

Analyst Andrew Nowinski, who has an overweight rating on Palo Alto (PANW), boosted his per-share price target to $265 from $250, noting the “significant” increase in both the company’s operating margins and free cash margin outlook, at 23% and 38%, respectively.

“The power of the platform and customers’ focus on consolidation should continue to drive strong results,” Nowinksi wrote in an investor note.

Nowinksi also pointed out that the company signed several seven- and eight-figure Prisma deals in the third-quarter, as annual recurring revenue attribute to SASE grew 50% year-over-year and customers grew 33% to more than 4,200.

“This strong demand suggests Zero Trust is a top priority for customers, and aligns with the positive pre-announcement from Zscaler,” Nowinksi added. “Palo Alto is also benefiting from improved sales productivity, as over 80% of sales reps added to the Prisma SASE pipeline for Q4.”

For the period ending April 30, Palo Alto (PANW) earned $1.10 per share, excluding one-time items, as revenue rose 23.7% year-over-year to $1.72B. Analysts were expecting earnings of 93 cents per share and $1.72B in revenue.

The company said billings grew 26% year-over-year to $2.3B, while remaining performance obligation grew 35% year-over-year to $9.2B.

Palo Alto Networks (PANW) expects fourth-quarter billings to be between $3.15B and $3.2B, while revenue is forecast to be between $1.937B and $1.967B. Earnings are expected to be within a range of $1.26 and $1.30 per share, excluding one-time items.

Analysts were expecting $1.95B in revenue and $1.18 per share in earnings.

Looking to fiscal 2023, Palo Alto (PANW) raised its expected billings forecast to be between $9.18B and $9.23B, while yearly revenue is now forecast to be between $6.88B and $6.91B.

Analysts were expecting $6.9B in annual revenue.

The Nikesh Arora-led company also said its adjusted free cash flow margin is expected to fall within a range of 37.5% to 38.5%.

Zscaler (ZS) and Fortinet (FTNT) were higher on back of the news while Tenable (TENB) slipped fractionally.