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Actionable news in PANW: PALO ALTO NETWORKS INC,

Stay Away From Palo Alto Networks


PANW shares have been on the decline this year as its revenue growth seems to be slowing down, but there are more reasons to stay away from the stock.

Insider selling activity at PANW suggests that institutional investors don’t have much confidence in the stock, which is not surprising given recent management moves.

PANW management has a high level of stock-based compensation and has been rewarding itself more than investors, which is not a good sign.

PANW’s costs are increasing at a similar pace to its revenue, which is not a good sign as a slowdown in revenue growth will lead to higher losses.

Palo Alto Networks (NYSE:PANW) has faced a difficult time on the stock market so far this year, declining over 20%. What's even more surprising is that despite posting record revenue in its last-reported quarter, the stock has continued to decline. In fact, Palo Alto had posted 43% growth in its top line on a year-over-year basis for the third quarter of 2016. More importantly, Palo Alto Networks has been reporting 50%-plus sales growth for several quarters.

The last quarter was the first time the company reported less than 50% growth. However, the reason for this underperformance was not the sales growth but the company's guidance for the next quarter which signified a 37% growth in revenue. Now, Palo Alto is expected to release its fourth-quarter results next week, but I think that the company won't be making a turnaround anytime soon.

This is because strong revenue growth is not sustainable in the long run, and high growth tech stocks often take a beating when their revenue starts to slow down. While it would have been unrealistic to expect Palo Alto Networks to continue reporting 50%-plus growth, there are several...