Shares of Palo Alto Networks, Inc. (NYSE:PANW) rallied to a new 52-week high of $179.15, eventually closing at $173.24 on Feb 27.
The momentum can be primarily attributed to impressive second quarter fiscal 2018 results. The company’s earnings and revenues came ahead of the Zacks Consensus Estimate as well as the guided range. The figures also portrayed year-over-year improvement on both counts.
Palo Alto’s revenues of $542.4 million jumped 28% year over year and non-GAAP earnings of 86 cents reflected year-over-year growth of 36.5%. The stellar second-quarter results backed an increase in fiscal 2018 guidance. Management also provided encouraging guidance for the current quarter.
Notably, Palo Alto stock has returned 50.5% in the past year, substantially outperforming the 26.1% rally of the industry it belongs to.
Driving Factors in Detail
Healthy demand environment, launch of innovative products and accelerated adoption of the company’s next-generation security platforms are the key catalysts.
Per management, successful sales execution has helped it acquire new clients. In the reported quarter, the company added nearly 3,000 customers. Moreover higher spending by existing customers on the company’s solutions positively impacted revenue growth.
Though the ongoing traction with the products introduced in the third quarter of fiscal 2017 was a drag on non-GAAP gross margin, the product launches have helped to attract new customers and drive the top line.
Moreover, lower operating expenses backed by increasing leverage in sales and marketing aided operating margin expansion, which was positive. Additionally, the company enjoyed a benefit of $10.6 million due to the lowered effective tax rate per the Tax Cuts and Jobs Act.
Zacks Rank & Stocks to Consider
However, Palo Alto Networks carries a Zacks Rank #4 (Sell), which reflects limited upside in the near term.
Some top-ranked stocks in the space include Qualys (NASDAQ:QLYS) , GTT Communications (NYSE:GTT) and Paycom Software (NYSE:PAYC) are worth considering since they sport a Zacks Rank #1 (Strong Buy) and trading near 52-week high. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Qualys, GTT Communications and Paycom is currently pegged at 17%, 35% and 25.75%, respectively.
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