Palo Alto Networks Inc. is raising eyebrows on Wall Street as it chooses to report its earnings and hold its conference call after the market closes on a Friday.
While the timing of Palo Alto Networks’ earnings announcements has fluctuated in recent quarters, it is unusual for companies in the S&P 500 index to release results on a Friday after the closing bell. According to Dow Jones Market Data, the last S&P 500 company to do so was Nike Inc. in December 2020.
As a newcomer to the index, Palo Alto Networks received its inclusion in June.
The decision to report on a Friday has left investors feeling uneasy, particularly since the fiscal fourth-quarter report is expected to bring a new full-year outlook and medium-term targets.
Analyst Joshua Tilton from Wolfe Research used football metaphors to describe the situation facing Chief Executive Nikesh Arora.
“While we don’t expect flawless news from the field, we remind investors that this is Nikesh’s time to shine under the Friday Night Lights, and he will not back down without a fight,” Tilton wrote. “So despite investor sentiment suggesting that the QB has a torn ACL, our checks indicate that it’s likely just a sprained ankle. Even with a QB on one leg, PANW can convert on 4th down and deliver a 4Q billings beat of 3%.”
Tilton maintains an outperform rating on the stock with a target price of $255.
Guggenheim analyst John DiFucci, who rates Palo Alto Networks as neutral, commented on the rollercoaster ride for investors over the past month.
“While the company has performed well during a difficult macro period, my early field checks for the fiscal fourth quarter imply that Palo Alto Networks wasn’t completely immune,” said DiFucci in a note on Tuesday.
Investors will eagerly await Palo Alto Networks’ Friday report to assess its performance in the face of market challenges.
Palo Alto Networks Faces Uncertainty Ahead of Earnings Release
Concerns have been raised regarding the recent actions of Palo Alto Networks, as the company’s choice to release earnings on an atypical day, followed by a lengthy conference call and one-on-one calls with sell-side analysts, has caused speculation among industry experts.
Despite recent field checks showing end-of-the-quarter strength, there is uncertainty surrounding Palo Alto Networks’ management decisions. According to analyst DiFucci, such deviations from standard practices are typically not seen in a positive light. However, due to the complex nature of the company’s business model and sometimes vague disclosure, it remains difficult to draw any concrete conclusions.
While DiFucci anticipates that the fourth-quarter results will meet expectations, he remains cautious about the company’s forecast. On average, analysts surveyed by FactSet expect Palo Alto Networks to report fourth-quarter earnings of $1.29 per share on revenue of $1.96 billion.
The unusual timing of the earnings release has caught the attention of Morgan Stanley analyst Hamza Fodderwala, who has an overweight rating on Palo Alto Networks and considers the stock a top pick. Fodderwala believes that the timing may hold positive news for the company and views it as a more favorable setup leading into the earnings release.
Fodderwala further speculates that Palo Alto Networks could announce a potential nine-figure contract with the U.S. Department of Defense, which has the potential to significantly impact the company’s revenue and billings. He estimates that this contract could be worth between $150 million to $200 million over the next five years if it is deployed departmentwide. It is worth noting that last year, Palo Alto Networks announced its last nine-figure Department of Defense deal just before its October-quarter earnings release.
Palo Alto Networks shares have experienced a 55% increase year-to-date, outperforming the ETFMG Prime Cyber Security exchange-traded fund (HACK), which is up 15%, as well as the broader S&P 500, which has gained 16% over the same period.
Reference Links:
- Risk for Palo Alto Networks
- Palo Alto Networks Predicts AI Transformation
