Why Palo Alto Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Palo Alto Networks have fallen 10% today after the company reported a GAAP net loss and offered weak forward guidance for its fiscal fourth quarter.

So what: Palo Alto's report wasn't entirely bad -- although revenue of $101.3 million missed the $103.4 million Wall Street consensus, it was still 54% higher year over year, and adjusted quarterly earnings of $0.06 per share actually beat expectations by $0.01. However, GAAP losses of $0.10 per share and guidance that fell below consensus on top and bottom lines spooked the market. Palo Alto now thinks it will earn $0.06 per share in adjusted profit on $106 million to $110 million in revenue, which is below the $0.07 per share on $113.7 million consensus Wall Street was looking for.


Now what: JMP Securities reduced its price target from $77 to $60, but still rates Palo Alto as a buy at today's prices. However, investors will need to tread with caution, as Palo Alto's guidance gives the appearance of some difficulties in expanding its profit even as revenue grows. A lack of forward earnings momentum stalls most stocks, and Palo Alto might not have the cachet to rise on the strength of its sales alone.

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The article Why Palo Alto Shares Plunged originally appeared on Fool.com.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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