Yahoo Finance Palo Alto Networks, Inc. Just Reported Earnings, And Analysts Cut Their Target Price
One of the biggest stories of last week was how Palo Alto Networks, Inc. (NYSE:PANW) shares plunged 21% in the week since its latest quarterly results, closing yesterday at US$197. Results look to have been somewhat negative - revenue fell 3.0% short of analyst estimates at US$817m, although statutory losses were somewhat better. The per-share loss was US$0.75, 83% smaller than analysts were expecting prior to the result. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
View our latest analysis for Palo Alto Networks
Taking into account the latest results, the latest consensus from Palo Alto Networks's 36 analysts is for revenues of US$3.39b in 2020, which would reflect a decent 8.6% improvement in sales compared to the last 12 months. The statutory loss per share is expected to greatly reduce in the near future, narrowing 39% to US$2.52. Before this latest report, the consensus had been expecting revenues of US$3.46b and US$1.29 per share in losses. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share forecasts.
The average analyst price target fell 7.1% to US$247, implicitly signalling that lower earnings per share are a leading indicator for Palo Alto Networks's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Palo Alto Networks analyst has a price target of US$305 per share, while the most pessimistic values it at US$190. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Palo Alto Networks's past performance and to peers in the same market. We would highlight that Palo Alto Networks's revenue growth is expected to slow, with forecast 8.6% increase next year well below the historical 26%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 12% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Palo Alto Networks to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts reduced their loss per share estimates for next year, perhaps highlighting increased optimism around Palo Alto Networks's prospects. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Palo Alto Networks going out to 2024, and you can see them free on our platform here.
You can also see our analysis of Palo Alto Networks's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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