Ahead of the Bell: Palo Alto Networks

Shares of Palo Alto Networks fall on weak fiscal 3rd-qtr revenue, worries about future growth

Associated Press

NEW YORK (AP) -- Shares of Palo Alto Networks Inc. tumbled before Friday's opening bell after the network security company posted a quarterly loss and issued a weaker-than-expected outlook for the current period.

While the company's adjusted profit for its fiscal third quarter beat Wall Street expectations by a penny, revenue fell short of predictions despite rising by more than 50 percent.

In premarket trading, Palo Alto shares fell $6.40, or 12 percent, to $47.99.

Citi analyst Walter Pritchard, who rated the stock at "Neutral," attributed the revenue shortfall to lower-than-expected product revenue, while profitability improvements propped up earnings.

Pritchard said that while Palo Alto continued to pick up market share during the recent quarter and its growth outpaced that of its competitors, it appears that product growth is slowing and that investors will have a tough time predicting where it will stabilize.

Jefferies analyst Aaron Schwartz backed his "Hold" rating for Palo Alto, but cut his price target for the stock by $6 to $54, also pointing worries about a slowdown in product revenue growth.

On a conference call with investors Tuesday, the company said it expected adjusted earnings of 6 cents per share on revenue of $106 million to $110 million in the current quarter, which runs through July. Analysts expected more: profit of 7 cents per share on revenue of $114 million.

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