Palo Alto Networks Inc (PANW): Can This Network Security Company Deliver More Growth?

Did you know that online advertisements are 182 times more likely to deliver malicious content than pornographic sites? The diversity of online threats grows each year. There’s no wonder that businesses want to protect themselves from various malicious content and extensively use software and hardware that enhance their network security.

Palo Alto Networks Inc (NYSE:PANW)

Recent report

Palo Alto Networks Inc (NYSE:PANW) is one of the companies that plays in the field of network security. The company’s main product is called Next-Generation Firewall, which offers thorough protection against various network threats. Palo Alto Networks Inc (NYSE:PANW) recently reported its quarterly earnings, which gives us a chance to take a closer look at its performance.

Total revenue for the fiscal third quarter grew 54% year-over-year to $101.3 million, but fell short of analysts’ expectations. GAAP net loss for the quarter was $0.10 per share, compared with net income of $0.8 million, or $0.00 per share, a year ago. Non-GAAP earnings were positive and beat analysts’ estimates. The company reported non-GAAP earnings of $0.06 per share compared to the estimate of $0.05 per share.

Would there be more growth?

Palo Alto Networks Inc (NYSE:PANW) trades at 123 times forward P/E. When you see such numbers, you may be sure that investors are anticipating major growth. If growth rates disappoint investors, the stock would suffer. As I mentioned earlier, Palo Alto Networks Inc (NYSE:PANW) fell short of revenue expectations. This would be a short-term negative catalyst for company’s shares. However, we are interested in the long-term prospects of the company.

There are two main things to consider when we think about prospects in network security. The positive one is that digital threats become increasingly complex and varied. In addition to that, companies are more and more dependable on the digital side of their businesses, from customer interaction to enterprise resource management. The negative one is the war on costs throughout the world. The recovery of the world economy remains fragile, and IT spending is pure costs for most businesses.

In this environment, Palo Alto Networks Inc (NYSE:PANW) tries to outgun competitors to get revenue growth. It reported that it has closed a seven-figure deal with a large industrial manufacturer in the U.S., in which it has beaten Check Point Software Technologies Ltd. (NASDAQ:CHKP) and replaced Juniper Networks, Inc. (NYSE:JNPR). In the other seven-figure deal in Japan, Palo Alto Networks has replaced Cisco Systems, Inc. (NASDAQ:CSCO). Palo Alto Networks believes that its product is superior in functionality and performance in comparison with competition, and that the firm is taking away the market share away from the competition.