This Software Stock is Exploding on Stellar Earnings

Palo Alto Networks Explodes On Stellar Q4 Results

Palo Alto Networks is yet again the darling of Wall Street after coming under immense pressure on spooking the markets by scheduling its earnings release date for after the bell. The slot is normally reserved for companies likely to deliver disappointing results. The sell-off came amid growing concerns that the cyber security firm was on course to deliver disappointing earnings results.

Palo Alto networks Results

The overreaction underscores the extreme market volatility on stocks with exposure to the artificial intelligence train trend. In addition, Palo Alto became the first S&P 500 constituent to schedule results on a Friday afternoon since December 2020. Since announcing on August 2, the stock fell by nearly 19%, wiping out $15 billion in market cap, far deeper than the 8% loss of the Nasdaq 100 over the same period.

Fast forward, Palo Alto Networks has recouped all the losses after delivering better-than-expected fiscal fourth-quarter results. The security software company delivered a 26% year-over-year increase in revenue to $2 billion, beating consensus estimates of $1.958 billion. Billings in the quarter were up 18%  to $3.16 billion as Non-GAAP profits came in at $1.44 a share against the $1.29 a share that analysts expected.

For the full year, Palo Alto Network delivered revenue of $6.9 billion, up 25% year over year, with adjusted profits of $4.44 a share. Full-year billings were up 23% to $9.2 billion. For the July 2024 fiscal year, the software security company expects revenue of between $8.15 billion and $8.20 billion. Earnings are expected to range between $5.27 and $5.40 per share against the street estimates of $4.98. Billings are expected to grow between 19% and 20% to between $10.9 billion and $11 billion.

Following the stellar fiscal fourth-quarter results, analysts’ sentiments toward the artificial intelligence-exposed stock have improved significantly. The average price target on the stock is $257 a share, implying 20% plus upside potential. Wedbush analyst Daniel Ives remains one of the most bullish analysts, with a $290 price target on the stock.

Palo Alto Networks Price Target

Deutsche Bank analyst Brad Zalnick has reiterated a Buy rating on the stock with a $225 to $270 price target. According to the analyst, Palo Alto Networks continues to outperform without the need for unusual theatrics such as management change, the need for merger and acquisition, and strategic pivots.

According to Bank of America, analyst Tal Liani increased focus on profitability and better cost controls continue to drive earnings growth depicted by the 16% beat in the fourth quarter. Consequently, the investment bank has increased its price target from $270 to $290.

Even as Palo Alto network stock rallied by 14% Monday morning, all eyes and ears are on Federal Reserve Officials expected to make crucial comments the week ahead. Jerome Powel, the US Federal reserve President is poised to make key remarks at the central bank’s annual Jackson Hole symposium on Friday.

Powell’s remarks will be scrutinized as they come after FED minutes last week indicated the central bank may be contemplating further rate hikes to help push inflation lower. Many investors had hoped the FED would go slow on rate hikes after the July meeting, but that does not appear to be the case.

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