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Palo Alto Is A 'Next Generation Leader' In Argus' View

Palo Alto Networks, Inc. NYSE:PANW, Cisco Systems, Inc. NASDAQ:CSCO - Palo Alto Is A 'Next Generation Leader' In Argus' View

Palo Alto Networks Inc (NYSE: PANW) has superior technology, and is a “next-generation leader in the enterprise security space,” Argus’s Joseph Bonner said in a report. He maintained a Buy rating on the company, with a price target of $205, following strong July quarter results.

Analyst Bonner commented that while “superior technology” was at the core of Palo Alto’s value proposition, the company’s growth should also be driven by market share gains, sales of additional products to existing customers and international expansion.

Exceptional Growth

Palo Alto has a market share of about 10 percent, despite which the company is generating about 50 percent revenue growth and over 60 percent billings growth. The company is currently achieving its fastest growth in the US, and would likely develop its international salesforce over time, Bonner mentioned.

Related Link: Wunderlich Weighs In On Palo Alto Networks Guidance: "More Leverage Than Meets The Eye"

“We also like management’s balanced focus on revenue growth and increased profitability, and note that the company could become an acquisition target for a larger tech player,” the analyst wrote, citing examples of McAfee being acquired by Intel Corporation (NASDAQ: INTC) and SourceFire by Cisco Systems, Inc. (NASDAQ: CSCO).

Estimates Raised

Palo Alto reported another strong quarter in F4Q, with record customer net additions in the company’s history and robust growth in revenue per customer. Bonner raised the EPS estimate for FY17 from $2.66 to $2.79.

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DateFirmActionFromTo
Aug 2016RBC CapitalMaintainsOutperform
Aug 2016NomuraMaintainsBuy
Aug 2016Goldman SachsMaintainsBuy

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