Palo Alto Networks Fell Today -- Is the Stock a Buy?

Source The Motley Fool

Palo Alto Networks (NASDAQ: PANW) stock saw a modest pullback in Friday's trading. The company's share price closed out the daily session down 0.9% amid a 0.1% decline for the S&P 500 index and a 0.4% decline for the Nasdaq Composite index. The stock had been down as much as 6.5% earlier in the day's trading.

After the market closed yesterday, Palo Alto published results for the first quarter of its 2025 fiscal year -- a period which ended Jan. 31. The company posted better-than-expected sales and earnings performance for the period and solid forward guidance, but the stock lost ground as margins and performance forecasts fell short of some investors expectations.

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Palo Alto Networks stock is a buy on strong fiscal Q1 report

The cybersecurity specialist posted non-GAAP (adjusted) earnings per share (EPS) of $0.81 on revenue of $2.26 billion. The performance came in significantly better than the average Wall Street forecast, which called for adjusted per-share earnings of $0.78 on revenue of $2.24 billion. Palo Alto's revenue was up roughly 14% year over year, and its EPS was up roughly 11% year over year in the period. While both sales and earnings beat the average Wall Street target, some investors may have been looking for stronger performance on the margins front.

With its recent quarterly report, Palo Alto guided for full-year revenue to come in between $9.15 billion and $9.19 billion -- good for growth of roughly 14% annually at the midpoint of the target range. Meanwhile, the company forecasts that annualized recurring revenue for its next-generation security segment will increase between 33% and 34% year over year.

All in all, Palo Alto's fiscal first-quarter report and forward guidance looked pretty encouraging. While some valuation concerns aren't unreasonable with the stock trading at roughly 63 times this year's expected earnings, the business posted strong quarterly results and looks poised to benefit from long-term tailwinds in the cybersecurity space.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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