I recently wrote a post for the IPOPlaybook about some top picks for online security IPOs. On the list was Palo Alto Networks (NYSE:PANW), which has been on a tear. The company came public in July and is up about 70% since then.
Today’s a little different, and the stock is feeling some pressure. The problem? Even though Palo Alto beat expectations for its first earnings report as a public company, investors clearly wanted more.
Revenues surged 88% to $75.6 million, which beat the Street consensus for $71.3 million in revenues, and forecasts for the next quarter were for $80 million to $84 million in revenues, with much of that range also topping analysts’ average estimates, at $80.8 million. Adjusted earnings of 3 cents per share also beat expectations for breakeven, and the company added more than 1,000 customers to bring its total above 9,000.
Palo Alto represents a new generation of security companies. It has built technologies to help deal with emerging threats, such as from mobile apps, social media, virtualization and cloud software.
Palo Alto’s competitors — including Check Point Software (NASDAQ:CHKP), Juniper Networks (NYSE:JNPR) and Cisco (NASDAQ:CSCO) — aren’t sitting down twiddling their thumbs, but they’re definitely playing a difficult game of catch-up. And all the while, Palo Alto continues to invest heavily in research & development.
Palo Alto is still a good bet for capitalizing on the growth in the security market, and a fall-off in the stock is probably an opportunity to pick-up shares at a better valuation. Some investors apparently have already seen this chance — after opening down 10%, Palo Alto’s losses have trimmed back to only about 7%.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.