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Palo Alto Hits a New 52-Week Low: What's Dragging it Down?
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Shares of Palo Alto Networks Inc. (PANW - Free Report) touched a new 52-week low of $111.79 on Apr 4, and eventually closed at $109.82, representing a year-to-date decline of 12.2%. Average volume of shares traded in the last three months was more than 2.16M.
Why the Plunge?
Palo Alto Networks enables firms, service providers and government bodies to impose tighter security measures through its network security platform. The company reported wider-than-expected loss in the second quarter. Revenues also missed the Zacks Consensus Estimate and fell short of the guidance range, primarily due to weak go-to-market execution. The company also provided a tepid revenue guidance for the forthcoming quarter.
Moreover, the decelerating revenue growth trend makes investors slightly cautious about Palo Alto's near-term performance. Notably, the company witnessed over 50% growth in quarterly revenues for nearly two years but the past two quarters. During first and second-quarter fiscal 2017, the year-over-year growth rates were 34% and 26.3%, respectively.
Also, Palo Alto’s revenue growth guidance range of 17–20% for third-quarter fiscal 2017 has increased concerns about its growth prospects. Additionally, the company’s billings growth rate of 22% during the fiscal second quarter was a lot lower than the previous two quarters’ growth rates of 33% and 45%.
In the last 60 days, the Zacks Consensus Estimate for third-quarter and fiscal 2017 witnessed downward revisions. Four of the six analysts covering the stock revised their estimates downward for the fiscal third quarter, while five of the seven analysts made downward estimates revision for fiscal 2017.
For fiscal third quarter, the Zacks Consensus Estimate is pegged at a loss of 42 cents per share, wider than the loss of 29 cents projected 60 days ago. Similarly, the Zacks Consensus Estimate for fiscal 2017 is pegged at a loss of $1.28 cents compared with a loss of $1.04 projected 60 days ago.
Notably, in the last one year, the stock was down roughly 30.6%, underperforming the Zacks categorized IT Services industry’s gain of 6.9%.
Furthermore, the company posted a negative earnings surprise of 52.6% in the last reported quarter.
It is worth mentioning that combined with other unattractive features like negative/low return on equity (ROE) and low/negative return on assets (ROA), the stock looks quite unattractive. Palo Altocurrently trades at a ROE of -28.8% as compared with the industry average gain of 24%. Notably, the company has an ROA of -7.9% compared with the industry average gain of 11%.
Moreover, a volatile spending environment and competition from Cisco Systems, Inc. (CSCO - Free Report) and Check Point Software Technologies Ltd. (CHKP - Free Report) remain concerns.
These above-mentioned factors make us sceptical about the performance of Palo Alto in the near term.
Micron has a long-term expected EPS growth rate of 10%.
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Palo Alto Hits a New 52-Week Low: What's Dragging it Down?
Shares of Palo Alto Networks Inc. (PANW - Free Report) touched a new 52-week low of $111.79 on Apr 4, and eventually closed at $109.82, representing a year-to-date decline of 12.2%. Average volume of shares traded in the last three months was more than 2.16M.
Why the Plunge?
Palo Alto Networks enables firms, service providers and government bodies to impose tighter security measures through its network security platform. The company reported wider-than-expected loss in the second quarter. Revenues also missed the Zacks Consensus Estimate and fell short of the guidance range, primarily due to weak go-to-market execution. The company also provided a tepid revenue guidance for the forthcoming quarter.
Moreover, the decelerating revenue growth trend makes investors slightly cautious about Palo Alto's near-term performance. Notably, the company witnessed over 50% growth in quarterly revenues for nearly two years but the past two quarters. During first and second-quarter fiscal 2017, the year-over-year growth rates were 34% and 26.3%, respectively.
Also, Palo Alto’s revenue growth guidance range of 17–20% for third-quarter fiscal 2017 has increased concerns about its growth prospects. Additionally, the company’s billings growth rate of 22% during the fiscal second quarter was a lot lower than the previous two quarters’ growth rates of 33% and 45%.
In the last 60 days, the Zacks Consensus Estimate for third-quarter and fiscal 2017 witnessed downward revisions. Four of the six analysts covering the stock revised their estimates downward for the fiscal third quarter, while five of the seven analysts made downward estimates revision for fiscal 2017.
For fiscal third quarter, the Zacks Consensus Estimate is pegged at a loss of 42 cents per share, wider than the loss of 29 cents projected 60 days ago. Similarly, the Zacks Consensus Estimate for fiscal 2017 is pegged at a loss of $1.28 cents compared with a loss of $1.04 projected 60 days ago.
Notably, in the last one year, the stock was down roughly 30.6%, underperforming the Zacks categorized IT Services industry’s gain of 6.9%.
Furthermore, the company posted a negative earnings surprise of 52.6% in the last reported quarter.
It is worth mentioning that combined with other unattractive features like negative/low return on equity (ROE) and low/negative return on assets (ROA), the stock looks quite unattractive. Palo Altocurrently trades at a ROE of -28.8% as compared with the industry average gain of 24%. Notably, the company has an ROA of -7.9% compared with the industry average gain of 11%.
Moreover, a volatile spending environment and competition from Cisco Systems, Inc. (CSCO - Free Report) and Check Point Software Technologies Ltd. (CHKP - Free Report) remain concerns.
These above-mentioned factors make us sceptical about the performance of Palo Alto in the near term.
Stock to Consider
Currently, Palo Alto Networks has a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Micron Technology, Inc. (MU - Free Report) , sporting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron has a long-term expected EPS growth rate of 10%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>