Why Palo Alto Networks Stock Surged Today


What happened

Shares of Palo Alto Networks (NYSE:PANW) jumped 19% on Tuesday after the cybersecurity specialist reported its fiscal fourth-quarter growth metrics. 

So what

Palo Alto Networks’ revenue rose 28% year over year to $1.2 billion. Increasingly expensive ransomware attacks are underscoring the vital need for effective cybersecurity solutions. Palo Alto Networks, in turn, experienced “notable strength in large customer transactions,” according to CEO Nikesh Arora, as corporations ramped up their cybersecurity spending. 

“What these attacks are highlighting is the constant shortcomings of enterprises and of government infrastructure, continually spurring demand and consolidation as companies revalue their cybersecurity posture,” Arora said during a conference call with analysts. 

A digital padlock.

Companies are turning to Palo Alto Networks for protection against cyberattacks. Image source: Getty Images.

Still, Palo Alto Networks remains unprofitable on a generally accepted accounting principles (GAAP) basis. However, its adjusted net income increased 12% to $161.9 million, or $1.60 per share. That was above Wall Street’s estimates for adjusted per-share earnings of $1.44. 

Now what

Looking ahead, management expects revenue to grow as much as 25% to $5.3 billion in fiscal 2022. The company also expects to generate adjusted earnings per share of $7.15 to $7.25.

Better still, with an anticipated full-year adjusted free cash flow margin of greater than 30%, Palo Alto Networks plans to return more capital to its shareholders via an upsized $1 billion stock buyback program.

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“We are pleased to deliver strength across all the key total shareholder return drivers — top line, operating margin, and free cash flow conversion,” CFO Dipak Golechha said. “We look forward to updating investors on our long-term goals at our upcoming analyst day on Sept. 13.”

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.




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