Shares of Palo Alto Networks Inc (NYSE:PANW) have minted new all-time highs for four consecutive days. But investors are getting concerned ahead of Palo Alto’s fiscal third-quarter earnings results due out Wednesday.
Given the rate at which Palo Alto is growing its customers, 
investors are worried about whether the momentum stock’s hot streak can continue.
Don’t lock in profits in PANW stock just yet, though — Palo Alto is on track to post more growth on Wednesday.
For the most recent quarter, Palo Alto is expected to post earnings of 20 cents per share — an 82% year-over-year climb, while revenue of $223 million calls for a 48% increase. For the full year, expected earnings of 78 cents per share should increase 95% year-over-year on revenue of $880 million, up 47% year-over-year.
Without question, expectations are high — both quarterly and full-year revenue are expected to climb at roughly 50%. At the same time, investors wonder how long Palo Alto can continue to put up such gaudy numbers.
It’s a legitimate question, given that PANW stock is up more than 140% in the past year and 200% in the past three. Just in 2015 PANW stock has skyrocketed 33%, against just 3% returns for the S&P 500. But given the rate at which cyber threats continue to climb, it’s also possible that PANW stock isn’t even close to reaching its peak.
The business world is growing more digital each year. Demand for cybersecurity will continue to climb, and as cyber thieves get more sophisticated, business leaders will need new and innovative approaches to combat threats. It’s not simply a matter of protecting their data; their reputations are on the line, to say nothing of legal liabilities.
Over the past couple of years, Palo Alto has shown an immense ability to service these needs, which has set PANW stock on fire. Why? Palo Alto’s proprietary next-generation technology not only detects when a threat is about to occur, the platform can actually prevent the threat. Most competing products can only alert a network admin that a threat is imminent.
Customers seem to appreciate that level of security; Palo Alto added more than 1,500 new customers in the most recent quarter, increasing its customer base 40% year-over-year to more than 22,500. Palo Alto serves 81 of the Fortune 100 companies and 916 of the global 2,000, indicating the value and trust large customers have placed on the company.
And with important product differentiations, including its WildFire subscription services, which had 5,000 customers in the second quarter (up 1,000 sequentially), Palo Alto Networks is showing no meaningful signs of slowing down. So, even though PANW stock has dominated its peers, PANW can still outperform for the foreseeable future, given the rate at which Palo Alto is growing its customers.
Bottom Line for PANW Stock
Palo Alto’s innovative edge and next-generation platform will remain in high demand, buoyed by increasing needs for more advanced layers of cyber threat detection and prevention.
With revenue still growing at close to 50%, driven by improved sales and distribution capabilities PANW stock is a sure bet to $200 from here, delivering 20%-plus gains from current levels of around $163, especially now that profits are beginning to pour in.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
