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Palo Alto (PANW) Earnings Preview

by | Nov 13, 2022

Palo Alto Networks (PANW) will report 11/17 after the close with the Street looking for $0.69 EPS and $1.55B in Revenues (+24.2%) and Q2/FY23 seen at $0.70/$1.65B and $3.17/$6.87B. PANW shares have closed higher the last five reports with a six-quarter average max move of 10.1%. PANW delivers cybersecurity products covering a broad range of use cases, enabling end-customers to secure their networks, remote and hybrid workforces, branch locations, and public and private clouds. PANW’s core focus is on Zero Trust Network Security, Cloud Security, SASE, Analytics & Automation and Threat Intelligence & Consulting. PANW has been an innovator and released 29 new products in 2021 and has consistently exceeded its internal targets. Cybersecurity remains a key focus area of spending for CIOs with an active threat environment as well as more advanced/complex threats. PANW sees a $110B TAM by 2024 growing at a 14% CAGR.

PANW has a $49B market cap and trades 43.5X Earnings, 32.8X EBITDA and 7.2X EV/Sales with revenues seen rising 25% this year and 21% next year along with 25.7% and 19.7% EPS growth. PANW implemented incremental conservatism in its FY23 outlook based on early signs of higher deal scrutiny last quarter though better positioned than many peers with less EMES exposure and its broad platform of market-leading products across Network, Cloud and Security Analytics/XDR helping to reduce vendor sprawl and drive more efficiency as organizations look to optimize their budgets.

Analysts have an average target of $220 with short interest elevated near 7% of the float. Loop Capital raised to Buy last week with a $200 target on accelerating momentum in enterprise from large deal activity base don industry checks. Evercore out in October seeing a positive re-rating with higher recurring revenue mix and expanding margins.

On the chart PANW with a big rebound last week off the 38.2% retracement and VWAP from the 2020 lows. PANW has moved right back into resistance of 1-year VPOC and upper monthly value while the 200-MA is at $175.

PANW options are pricing in a 7.15% earnings move and put/call open interest at the 79th percentile with a -23.1% average IV30 crush. PANW has seen some buyers in December $145 and $135 puts but also 800 March $190 calls bought 11/10 and 2000 December $150 calls bought in open interest.

Trade to Consider: Long the PANW November/January $150 Put Calendar Spreads at $4.50 Debit

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