Palo Alto Networks (PANW): Wells Fargo Looks On The Bright Side
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Wells Fargo analyst Gray Powell, reiterated his Outperform rating on shares of Palo Alto Networks (NYSE: PANW) along with his valuation range of $183.00 to $191.00. His perspective is that the weakness in guidance is caused by a shift towards Subscription revenue rather than perpetual licensing which would offer a larger upfront revenue bump. He followed up with a billings analysis that showed a level of $572M, higher than the $562M, expected by Street consensus. This analysis did not look at the underlying bookings growth rates however.
The analyst stated: "The billings upside was clean as the change in long-term deferred accounted for 13.6% of billings vs 14.6% in FQ3’16. In addition, product revenue of $191MM (+24% yr/yr) was ahead of the Street estimate of $188MM (+22% yr/yr)". Additionally "PANW expects product revenue growth of only 12-13% vs the prior Street expectation of 22% yr/yr.
Admittedly, this is likely a disappointment to many, however growth should improve in 2H’17 as compares ease. Furthermore, management expects product growth to improve in FY’18. It is also worth noting that PANW is targeting services revenue growth in excess of 50% vs the prior Street est of 45%."
Shares of Palo Alto Networks closed at $143.45 yesterday.
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