4 Facts Behind Palo Alto Networks’ 13.5% Stock Price Drop in May

Palo Alto Networks (PANW) suffered a 13.5% drop in value in May as the company’s shares fell on news of a widening GAAP loss. The news caused investor sentiment to wane. The company’s financials, however, were mainly positive despite the recent slump in stock prices.

1.     Revenue is Up 48% Year Over Year

Palo Alto’s fiscal Q3 report was released on May 26. The company posted $345.8 million in quarterly revenue, up 48% year over year. Revenue figures outpaced estimates by $9 million, pointing to strong growth.

Billings rose to $486.2 million, a 61% increase year over year.

2.     Non-GAAP Earnings Rise

The company’s non-GAAP earnings came in at $38.5 million, up to $0.42 per share. The figure is a sharp increase from a year ago when the company had non-GAAP earnings per share of $0.23. The company’s figures were aligned with what analysts expected from the company.

3.     GAAP Loss Widens

The main factor for the company’s stock price slumping is that on a GAAP basis, the company is bleeding money. On a GAAP basis, the company posted a $70.2 million loss on the quarter, up from a $45.9 million loss during the same quarter a year prior.

Stock-based compensation is a major driver behind the company’s widening GAAP.

4.     Guidance Figures Give Investors Slim Hope

Guidance figures for the company match analyst expectations. The company projects revenue of $386 million and $390 million for fiscal Q4 2016. Non-GAAP EPS is estimated between $0.48 and $0.50.

The positive figures are below what investors were hoping for on the quarter.

Positive cash flow isn’t enough to bring investor sentiment for the company higher. The company trades at 10 times its trailing 12-month sales and stock-based compensation, and deferred revenue balances are a major concern going forward.

Rapid growth is a necessity for the company in an effort to boost investor sentiment.

The following two tabs change content below.