What led to Palo Alto Networks Inc (NYSE: PANW) stock crash

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Palo Alto Networks Inc (NYSE: PANW) stock lost over 16.6% on 25th Feb, 2020 pre-market session (Source: Google finance) after the company missed the sales estimates and cut its annual forecast. The company has reported Non-GAAP net income for the fiscal second quarter 2020 of $120.3 million compared to non-GAAP net income of $147.0 million, for the fiscal second quarter 2019.

PANW in the second quarter of FY 20 has reported the adjusted earnings per share of $1.19, beating the analysts’ estimates for the adjusted earnings per share of $1.12. The company had reported the adjusted revenue growth of 15 percent to $816.7 million in the second quarter of FY 20, missing the analysts’ estimates for revenue of $844 million, according to FactSet. The second quarter revenue was below the expectations mainly due to continued impact of sales incentives related to the Next-Generation Security products from the prior fiscal year. Billings rose 17% year over year to $998.9 million & the deferred revenue increased 27% year over year to $3.2 billion

For the fiscal third quarter, the company forecast adjusted earnings to be in the range of 96 cents to 98 cents a share on revenue expected to be in the range of $835 million to $850 million. Analysts on average were expecting adjusted earnings of $1.25 a share on revenue of $873 million, according to FactSet. For the fiscal third quarter 2020, the company expects total billings to be in the range of $980 million to $1 billion, which represents year-over-year growth to be between 19% and 22%.

The company expects 2020 adjusted earnings to be in the range of $4.55 to $4.65 a share, down from $4.90 to $5 a share, and revenue expected to be in the range of $3.35 billion to $3.39 billion, down from $3.44 billion to $3.48 billion. For fiscal 2020, the company expects total billings to be in the range of $4.075 to $4.125 billion, representing year-over-year growth between 17% and 18%.

Meanwhile, the company plans to execute an accelerated share repurchase of $1 billion with an unnamed financial institution. The Company plans to enter into an ASR transaction with a financial institution during its fiscal third quarter 2020, which is subject to market conditions. The ASR transaction is in addition to the Company’s $1 billion share repurchase program that the company had announced in February 2019. At the end of January, 2020, $801.9 million remained available for future share repurchases under this program.

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