Why Palo Alto Networks Stock Could Be in Trouble
Where Is Palo Alto Networks Stock Headed in 2017?
Palo Alto Networks Inc (NYSE:PANW) fell one percent on Monday as an analyst note reiterated an “outperform” rating but lowered the price target.
This isn’t exactly terrible news for Palo Alto Networks stock, as the company still maintained a positive outlook going forward, but the note from FBN Securities’ Shebly Seyrafi, which pegged the price target to $155.00 from $170.00, certainly will give some investors pause. (Source: “Palo Alto: FBN Cuts Target on Challenges to Growth,” Barron’s, December 19, 2017.)
Seyrafi writes that Palo Alto Networks stock management “has telegraphed that it expects its product revenue growth in FQ2 to be a low to mid-single digits % (below our prior 11% estimate).”
PANW still expects product revenue growth for full-year F2017 (ends July) to be 12-13%, but this creates a more ‘back-end loaded’ trajectory for product growth (note that we have product revenue growth returning to the mid-teens % in FQ3 and FQ4 2017 in order for the annual 12-13% Y/Y guide to be achieved, but this may be difficult to achieve).
In the security market more broadly, Seyrafi was less than positive, believing that growth in the cybersecurity market will slow to single digits in the coming year.
Neither has 2016 been kind to Palo Alto Networks stock, as the company has seen a 27% decline since the beginning of the year. The hurting of the share price could have multiple factors, including increased competition and lack of growth prospects moving forward, as outlined in the note.
PANW stock will be good to watch in 2017 to see if the the stock can recover to some its former strong growing trend, or if this slowing growth speaks to a potentially longer downturn.