25 August 2020

Palo Alto Shares Breach Support Despite Strong Results

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What’s happening: Shares of Palo Alto Networks declined in extended trading on Monday despite the cybersecurity company reporting better-than-expected results for its fiscal fourth quarter and issuing a strong outlook.

What happened: Palo Alto Networks has been a beneficiary of the secular trend towards work from home, amid the pandemic.

Despite topping Wall Street estimates on both results and guidance and announcing yet another acquisition, the company saw its shares head south in after-hours trading.

How were the results: Although the cybersecurity firm reported a wider loss for its fiscal fourth quarter, it came in better than expectations.

  • Revenues grew to $950.4 million, from $805.8 million in the same quarter last year, exceeding the consensus view of $924 million.
  • Palo Alto Networks reported a quarterly loss of $58.9 million, or 61 cents per share, versus a loss of $20.8 million, or 22 cents per share, in the year-ago quarter.
  • Adjusted earnings came in at $1.48 per share, beating the consensus estimate of $1.39 a share.

Why it matters: Back in May, the Santa Clara, California-based company had said that remote-work trends due to the pandemic had provided a boost to its results and that the trends are likely to continue for at least a year.

For its fiscal first quarter, Palo Alto Networks projected revenues between $915 million and $925 million and adjusted earnings of $1.32 to $1.35 per share. The guidance was better than the Street expectations of $900.9 million and $1.18 per share.

Over the past couple of years, Palo Alto Networks has made an array of acquisitions, in a bid to transform its image from a firewall company to a full-fledged security software firm. Management added to the long list by announcing a definitive agreement to acquire incident-response firm Crypsis Group for $265 million to provide its customers a wide range of services in case a breach takes place.

“By joining forces, we will be able to help customers not only predict and prevent cyberattacks but also mitigate the impact of any breach they may face,” CEO Nikesh Arora said during the earnings call. Management expects the deal to close in the fiscal first quarter.

How shares responded: Shares of Palo Alto Networks lost 2.9% to reach $259.81 in after-hours trading on Monday, following a 0.8% decline during the regular session. The stock has climbed around 15% year to date, versus a 6.2% gain in the S&P 500 index and a 27% surge in the tech-laden Nasdaq 100.

What to watch: With Palo Alto Networks reporting upbeat quarterly results and issuing strong projections, investors will look out for news of how the company is fairing in the current quarter. Investors are also bullish about the contribution of Crypsis Group and will closely monitor news related to approvals till the acquisition is closed.

The Markets Today

     

European stocks will be in focus today, ahead of a basket of economic reports from the region.

Context: European stocks closed sharply higher on Monday with investors weighing the latest developments around a possible coronavirus treatment.

Details: The US FDA (Food and Drug Administration) issued an emergency approval to use blood plasma from patients who had recovered from covid-19.

US President Donald Trump is considering fast-tracking the University of Oxford’s covid-19 vaccine being developed in the UK ahead of the upcoming presidential elections in the country.

Shares of BT Group jumped around 7%, after Sky News reported that the company was looking to defend itself against possible suitors. Bunzl’s stock gained around 3% after the company reported two acquisitions and also reinstated its dividend.

The Stoxx Europe 600 index closed higher by 1.6% on Monday, with most sectors trading in positive territory. The German DAX 30 index climbed 2.4% and the French 40 index surged 2.3% on Monday, while London’s FTSE 100 gained 1.7%.

What to watch: Investors await various economic reports from the European countries, including German GDP annual growth rate, Spain's producer prices, Germany’s Ifo business climate indicator and UK’s CBI distributive trades.

Markets will continue to assess the covid-19 numbers, with total cases surging to 23.5 million globally.

Other Markets: US indices trading closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.35%, 1% and 0.60%, respectively.

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South Africa’s leading business cycle indicator, Turkey’s capacity utilization and manufacturing confidence index, Brazil's current account and foreign direct investment, Mexico’s current account as well as the US Redbook index, S&P Case-Shiller home price index, CB consumer confidence, new home sales, Richmond Fed manufacturing index and house price index.

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