Palo Alto Networks (PANW) Q1 earnings preview: Billings to dominate amid costs threat

Cybersecurity firm Palo Alto Networks Inc. (NYSE: PANW) is set to release its first-quarter 2020 earnings results on Monday, November 25, after the market closes. The top line will be benefited by billings growth, which is likely to soar above the billion-mark.

However, the bottom line will be impacted by the costs and expenses that will be incurred due to its investments in the research and development of new hardware and software development. The hardware and software are both critical in expanding its leadership in the enterprise security market. The rapidly changing applications and threat landscape will allow the company to focus on research.

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The company relies on new offerings such as cloud security, artificial intelligence, and analytics offerings for future success. However, the market for enterprise security products is intensely competitive that is likely to increase in the future from established competitors and new market entrants.

Analysts expect the company’s earnings to drop by 12% to $1.03 per share while revenue will jump by 17% to $767.86 million for the first quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $264.14.

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For the fourth quarter, Palo Alto slipped to a loss from a profit last year, due to higher costs and expenses. The top-line growth was driven by a 22% jump in the total billings that crossed the billion-mark for the first time. The company achieved about 180% year-over-year growth in its newer Prisma and Cortex offerings.

For the first quarter, the company expects billings growth of 15% to 17% year-over-year and revenue growth of 16% to 17%. Adjusted earnings are anticipated to be $1.02 to $1.04 per share for the first quarter. For fiscal 2020, Palo Alto predicts billings growth of 17% to 19%, revenue growth of 19% to 20%, and adjusted earnings of $5.00 to $5.10 per share.

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