Palo Alto Networks Inc. (NYSE: PANW) stock dropped to a 2-year low of $138.64 on Friday as the impact of the Covid-19 outbreak weighed on the cybersecurity sector and prompting the company to cut its full-year guidance. Elsewhere, the chip manufacturers were also hurt by the virus, which impacted the chip demand and supply chains.
The investors remained concerned about the company’s future due to the struggle in shifting more resources to its cloud-based security-software business as well as in core hardware-based firewall segment expansion. Also, the increasing concerns have turned out to be a major drawback that includes the company’s execution and guidance challenges as well as weak product revenue.
The market experts believe that the company has been straddling in the transition from a traditional firewall product vendor to a cloud-based security company. The transition and the challenges are expected to be completed/overcome by this year-end but the virus outbreak could delay the same.
Also, the company is finding it hard to change the current security vendor landscape and the customer’s estate. But the company’s future opportunity lies in the infrastructure cloud and cloud security on a multi-cloud basis. The new opportunity of establishing itself in the multiple clouds or hybrid cloud could be driving growth but this is likely to occur only next year.
For the second quarter, Palo Alto posted a wider loss due to higher costs and expenses despite a 15% jump in the top line. The top-line growth was narrowed by the continued impact of sales incentives related to next-generation security products.
The market experts believe that the product revenue growth will improve in the second half of fiscal 2020 and return to full growth in fiscal 2021 after remaining below its forecast. Till that time, the stock is likely to take a run based on the macroeconomic conditions and the company’s performance metrics.
The stock, which remained overvalued with a neutral pattern, has fallen over 41% in the past year and over 42% in the past month. The shares are expected to be negative in the near and long-term due to growth concerns. The stock is trading below the 50-day moving average of $218.33 and the 200-day moving average of $222.56.