Topline
Cybersecurity firm Palo Alto Networks earned the ire of analysts in recent weeks over its decision to report earnings after market close Friday, fueling a sizable selloff amid speculation about the cause for the strange timing.
Key Facts
Since Palo Alto announced August 2 when it would disclose quarterly results, its stock is down 19%, down 2% to a 2.5-month low of $204 early Friday.
Far deeper than the tech-heavy Nasdaq’s 8% loss over the period, Palo Alto’s slide wiped out $15 billion in market capitalization.
What was behind the historically rare choice to report earnings late on a summer Friday is up for debate (Palo Alto did not respond to Forbes’ inquiry), but most analysts agree it was bizarre.
Deutsche Bank’s Brad Zelnick described the event as “unusual,” Rosenblatt’s Catharine Trebnick characterized it as “odd” and Wedbush’s Dan Ives declared the decision is among the “biggest PR disasters and black eyes” he’s witnessed while covering tech this millennium.
Zelnick surmised the upcoming earnings call, which will stretch from 4:30 p.m. to 6:30 p.m. ET, “could very well” include an announcement that Palo Alto will exit the hardware business which accounted for 22% of its $1.7 billion in sales last quarter, while Trebnick offered more innocuous possible explanations such as a “tight schedule” for Palo Alto brass or a desire to give analysts the weekend to sit with two years of guidance.
The “sky’s the limit” for explanations for the Friday report, according to Stifel Nicolaus analyst Adam Borg.
Contra
Despite the malaise, analyst sentiment toward the artificial intelligence-exposed stock remains strong. The average price target for Palo Alto is $257, according to 42 analyst ratings tracked by FactSet, implying roughly 25% upside. Palo Alto shares are still up 48% year-to-date, placing it among the 20 best-performers on the S&P 500.
Crucial Quote
Wall Street’s “fearing the worst and hoping for the best into this Friday night Twilight Zone conference call…that has become the soap opera of the cybersecurity industry and tech investor community over the last few weeks,” Ives wrote to clients. Still, Wedbush’s $290 price target for Palo Alto remains among the most bullish calls of any firm covering the Silicon Valley company.
Surprising Fact
This will be the first earnings report from an S&P constituent released on a Friday afternoon since December 2020, according to MarketWatch. Palo Alto last reported earnings on a Friday afternoon in 2018, Trebnick noted.
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