HomeMost Popular Palo Alto Networks (PANW) Q2 2024...

Palo Alto Networks (PANW) Q2 2024 Earnings Preview Palo Alto Networks (PANW) Q2 2024 Earnings: What Lies Ahead

Actionable Trade Ideas

always free

A Closer Look at Performance

When it comes to growing revenues and profits among the cybersecurity space, you would be hard-pressed to find a stronger-performing name than Palo Alto Networks (PANW). The cybersecurity specialist has consistently outperformed.

Offering a diversified suite of specialized security products, Palo Alto is set to report second quarter fiscal 2024 earnings results after the closing bell Tuesday. Investors are expecting another strong quarter, evidenced by the stockโ€™s impressive performance. Its shares have risen 110% over the past year, including 70% over the past six months. Meanwhile, the stock is up 25% year to date, compared to a year-to-date rise of 5% for the S&P 500 index.

Analystsโ€™ Projections and Market Sentiment

Investors may be asking if nowโ€™s a good time to lock in some profits; however, more gains are expected, according to Wedbush Securities. Citing Palo Altoโ€™s increasing cloud deal momentum in the โ€œGolden Age of Cybersecurity,โ€ Wedbush raised the stock as Outperform, while boosting the price target on Palo Alto Networks to $425 from $350, suggesting a potential premium of 15%. โ€œWe are seeing strong cybersecurity deal activity for the stalwart across the board with cloud-influenced, enterprise-wide deals as the theme of the January quarter,โ€ noted Wedbush.

Despite concerns about valuation amid recent gains in share price, the firm kept PANW as a top cyber pick to own in 2024 and expects it to benefit from its leadership position in several key cybersecurity categories. As such, Palo Alto is predicted to deliver more growth on both the top and bottom lines when it reports results for the quarter that ended January. The company on Tuesday will be tasked with demonstrating it can still live up to such lofty expectations to support the stockโ€™s strong year-to-date performance.

Revenue and Earnings Expectations

For the three months that ended January, Wall Street expects the California-based company to earn $1.16 per share on revenue of $1.84 billion. This compares to the year-ago quarter when earnings came to 83 cents per share on revenue of $1.55 billion. For the full year, ending August, earnings are projected to increase 24% year over year to $5.51 per share, while full-year revenue of $8.19 billion would rise 19% year over year.

The fact that Palo Altoโ€™s revenue is still growing close to 20% annually underscores the strength in the companyโ€™s cloud business. The company has positioned itself as a three-platform cybersecurity business, consisting of its Zero Trust Platform, Code to Cloud Platform and AI-driven Autonomous Security Ops Platform. The total addressable market is projected to be $80 billion, $40 billion, and $90 billion, respectively, for growth in the Palo Altoโ€™s Zero Trust Platform, Code to Cloud Platform, and Autonomous Security Ops Platform. To date, the company has executed on its advantages.

Past Performance and Business Mix

In the first quarter, Palo Alto beat on both the top and bottom lines, with revenues growing 20% year over year to $1.88 billion, thanks to a 53% year over year surge in annual recurring revenue reaching $3.2 billion. Just as impressive, Q1 adjusted EPS of $1.38ย beat estimates by 22 cents. Total Q1 billings came in the range of $2.33 billion to $2.4 billion, representing year-over-year growth of between 15% and 18%.

During the quarter, the companyโ€™s business mix shifted towards higher margin, recurring software revenues, which now account for 83% of total revenue. As a result, its margin profile, freeย cash flow generation, and EPS surged during the quarter. These results, and the demonstrated operational resiliency, are notable given the challenging macroeconomic conditions Palo Alto Networksโ€™ business has faced. Investors on Tuesday will want to see whether these strong growth trends can continue.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.