Palo Alto Networks (PANW) Manages Through Gross Margin Pressure - BofA Securities
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BofA Securities analyst Tal Liani reiterated a Buy rating and $650.00 price target on Palo Alto Networks (NASDAQ: PANW) after the company reported strong 3Q22 results with billings of $1,796.9mn, up 39.7% YoY, above Street’s $1,606.4mn. Revenue of $1,386.7mn was up 29.1% YoY, versus consensus estimates for $1.360.2mn.
The analyst stated "Palo Alto Networks continues to draw strength from its new offerings with NGS ARR growing 65% YoY, a continuation of the 70%+ growth seen in the last two quarters. FY22 guidance was raised across almost all metrics, with expectations for growth around both legacy and new areas. We fine-tune our estimates, and reiterate Buy and $650 PO on solid performance and continued strength in Software and NGS growth." "The company manages supply constraints substantially better than some of the networking vendors, but the constraints continue to weigh on gross margin, with 3Q GM of 72.9% down approx. 170bps YoY. However, operating margin of 18.2% was up 120bps YoY supported by lower Opex from better cost controls and efficiencies across the business. In addition, cash conversion improved and adjusted FCF was up 40% YoY, with management targeting FCF to grow faster than earnings."
Shares of Palo Alto Networks closed at $436.37 yesterday.
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