Palo Alto Networks Inc. shares fell Monday following the surprise announcement of a new chief executive and a weak earnings outlook just before posting strong quarterly results.
Palo Alto PANW, -1.88% shares on Monday opened briefly above their Friday close, touched an all-time high of $214.69, and quickly dropped lower. Shares were last trading down 2.9% at $203.17.
The network security company reported a fiscal third-quarter loss of $46.7 million, or 51 cents a share, compared with $60.9 million, or 67 cents a share, in the year-ago period. Adjusted earnings were 99 cents a share. Analysts surveyed by FactSet had forecast 96 cents a share.
Revenue rose 31% to $567.1 million, beating the FactSet consensus of $547.4 million, as product and subscription and support revenue both rose more than expected, and billings jumped 33% to $721 million, compared with the $668.8 million expected by the Street.
Overshadowing earnings, however, was the announcement made late Friday that Mark McLaughlin was being succeeded as chairman and chief executive by Nikesh Arora, who has held C-level positions at SoftBank and Google.
Cowen analyst Gregg Moskowitz, who has an outperform rating and raised his price target to $223 from $215, said Palo Alto Networks still appears well positioned even with the departure of McLaughlin.
“While this news was a surprise, Mr. Arora is an accomplished executive, and we wouldn’t expect any meaningful disruption during the transition,” said Moskowitz. “On the call PANW also noted that Mr. Arora’s background will serve PANW well given what will be an increasing shift towards massive data sets, analytics, and cloud.”
For the fourth quarter, however, Palo Alto Networks forecast earnings of $1.15 to $1.17, while analysts had estimated $1.21 a share. Moskowitz said the lighter-than-expected earnings forecast came