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

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Palo Alto Networks Inc (NYSE: PANW) stock lost over 11% (as of 10:52 am GMT-5; Source: Google finance) on margins pressure.  PANW has delivered the gross margin of 76.6% in Q1, which was down 10 basis points compared to last year. Q1 operating margin was 15.8%, which is a decline of 500 basis points year-over-year and includes a headwind of approximately $7 million of net expense associated with the recent acquisition.

The firm announced its intention to acquire Aporeto for about $150 million in cash. Aporeto has unique machine identity-based micro-segmentation capabilities that complement the existing cloud-native security platform capabilities delivered by Prisma Cloud. Overall, Palo Alto Networks had reported two acquisitions along with earnings in May, after completing five acquisitions in about 12 months through the early part of 2019. Further, in the quarter the company has signed an eight-figure deal with a leading casino company

Moreover, in the first quarter 2020, the Americas posted the growth of 18%, EMEA grew 16%, and APAC grew 21%. The company has delivered the product revenue of $231.2 million in Q1, which has declined 4% compared to the prior year. Q1 SaaS-based subscription revenue of $318.6 million, has posted the rise of 38%. Support revenue of $222.1 million, increased 21%. In total, subscription and support revenue of $540.7 million, have risen 30% and accounted for a 70% share of total revenue. Further, in the first  quarter 2020, the total billings have increased 18% to$897.4 million. The dollar-weighted contract duration for new subscription and support billings in the quarter remained at approximately three years, but fell by approximately three months year-over-year. Total deferred revenue at the end of Q1 was $3 billion, an increase of 26%.

PANW in the first quarter of FY 20 has reported the adjusted earnings per share of $1.05, while adjusted revenue growth of 18 percent to $771.90 million in the first quarter of FY 20.

Additionally, PANW ended October with cash, cash equivalents and investments of $3.3 billion. During the first quarter, the company had repurchased over 947,000 shares of common stock at an average price of approximately $209 per share.

The expenses of acquisition of Aporeto will weigh on second-quarter earnings. Palo Alto Networks expects the adjusted second-quarter earnings of $1.11 to $1.13 a share which is lower than analysts’ average forecast of $1.30 a share.

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