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Palo Alto Networks Plunges After Posting 3rd-Quarter Results

- By Alberto Abaterusso

Shares of cybersecurity company Palo Alto Networks Inc. (PANW) fell 5.42% to $203.65 in after-hours trading on Wednesday after reporting third-quarter 2019 results.

Non-GAAP earnings, which grew 26% year over year to $1.31 per share, topped consensus estimates by 6 cents.

The GAAP net loss of 21 cents per share represents a substantial improvement from the loss of 44 cents per share in the prior-year quarter. The global cybersecurity company missed consensus estimates by 2 cents.

Revenue grew 28% to $726.6 million, beating expectations by $21.63 million. Subscription revenue rose 28.2% to $448.2 million and product revenue increased 27.6% to $278.4 million.

Palo Alto Networks also posted 30.1% growth in non-GAAP net income to $130.1 million and a 50% decrease in the GAAP net loss to $20.2 million.

For the final quarter of fiscal 2019, Palo Alto Networks projects 21% to 22% growth in total revenue to between $795 million and $805 million. The consensus estimate is $793.81 million. The company also guided for earnings of $1.41 to $1.42 per share versus analysts' expectations of $1.55.

The balance sheet had $3.05 billion in cash on hand and short-term securities, $1.57 billion in total debt and $2.63 billion in total deferred revenues as of April 30.

Palo Alto also announced it is acquiring two companies, Twistlock and PureSec, to help with the expansion of its cloud services.

Twistlock is a leading company in container security, while PureSec is involved in serverless security.

In a statement, Chairman and CEO Nikesh Arora said the acquisitions "will significantly enhance" its presence in the cybersecurity space.

"Both Twistlock and PureSec will be important additions to helping protect our customers' journey to the cloud," he added. "Combining their capabilities with Prisma, our leading cloud security suite, is a huge win for all of our customers."

The stock closed at $215.3 on Wednesday for a market capitalization of $20.44 billion. Following a 3% increase over the 52 weeks through May 29, the share price is near the 200-day simple moving average line but still below the 100- and 50-day lines. The 52-week range is $160.08 to $260.63.

The 14-day relative strength index of 33 suggests the stock is nearing oversold levels.

Palo Alto Networks has outperformed the S&P 500 index by 3.3% so far this year.

Wall Street issued a buy recommendation rating for the stock with an average target price of $283.70 per share.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.