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Palo Alto (PANW) Tops Q4 Earnings & Revenue Estimates

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Zacks Equity Research
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Palo Alto Networks PANW reported fourth-quarter fiscal 2020 non-GAAP earnings of $1.48 per share, which surpassed the Zacks Consensus Estimate $1.39. Moreover, the bottom line compares favorably with the year-ago quarter’s earnings of $1.47 per share.

The company’s revenues of $950.4 million improved 18% year over year. The figure also beat the Zacks Consensus Estimate of $920.9 million.

The top line was primarily aided by several deal wins and increasing adoption of the company’s next-generation security platforms on the rising remote-working trend and heightening need for stronger security. Growing traction in the Prisma and Cortex offerings also acted as a tailwind.

Palo Alto Networks, Inc. Price, Consensus and EPS Surprise

Palo Alto Networks, Inc. Price, Consensus and EPS Surprise
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise

Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote

Quarterly Details

Product revenues remained flat year over year at $305.6 million and contributed to 32% of the total revenues. The company’s subscription and support revenues, which accounted for 68% of the total revenues, improved 28.9% to $644.8 million.

Further, billings improved 32% year over year to $1.4 billion. Deferred revenues also jumped 32% to $4.3 billion.

Additionally, Palo Alto’s non-GAAP gross margin contracted 320 basis points (bps) on a year-over-year basis to 74.3%. In addition, non-GAAP operating margin shrunk 180 bps to 19.8%.

Palo Alto exited the fiscal fourth quarter with cash, cash equivalents and short-term investments of $3.75 billion compared with the $2.2 billion recorded at the end of the previous quarter. The company’s balance sheet does not carry any long-term debt.

During the quarter, it generated cash flow from operations of $333.7 million and free cash flow of $301.9 million. In fiscal 2020, the company generated operating and free cash flows of $1.04 billion and $821.3 million, respectively.


For first-quarter fiscal 2021, Palo Alto anticipates year-over-year revenue growth of 19-20%, which comes in between $915 million and $925 million. Billing growth is anticipated between 15% and 17%, ($1.03 billion-$1.05 billion).

Non-GAAP earnings per share are estimated in the range of $1.32-$1.35.

Zacks Rank and Key Picks

Currently, Palo Alto Networks carries a Zacks Rank of 3 (Hold).

Some better-ranked stocks in the broader technology sector include Apple AAPL, Lam Research Corporation LRCX and Synaptics SYNA, all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Apple, Lam Research and Synaptics is currently pegged at 10.7%, 15.4%, and 10%, respectively.

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