TLDR at the bottom for the regards that don't like a nice DD. # Analysis Palo Alto Networks ($PANW) is going to report FY24 Q4 earnings after...
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The original was posted on /r/wallstreetbets by /u/MeasurementRare8147 on 2024-08-19 14:31:24+00:00.

TLDR at the bottom for the regards that don’t like a nice DD.

Analysis

Palo Alto Networks ($PANW) is going to report FY24 Q4 earnings after market today at 4:30pm (ET). I’m bearish going into the earnings because:

  • If you listen to the earnings transcript for Q3, and Q2, the CFO emphasized that the billings and revenue will slowdown for the next 12-18 months. CFO’s excerpt from Q3 transcript:

Before I provide Q4 guidance, I wanted to remind you of what we talked last quarter when we introduced platformization and discussed the top-line headwinds we expected it would have. We continue to expect platformization related drivers, both larger deals with associated cost of money impacts and acceleration in platformization programs will impact our billings over a total of a 12 to 18 month period.

  • Nikesh Arora (CEO) is smart guy, and platformization is a great long-term strategy for growth, but the Wall St. only cares about next quarter, and next year guidance, which continues to be lackluster.
  • To encourage platformization, they are giving away 6 months of free use for the new platforms, so this further strengthens my thesis that things are gonna get worse, before they get better. CEO’s excerpt from Q3 transcript:

Yeah. So in the first 50 or 60 deals, I think we’ve got a little sort of portfolio, all kinds of stuff that’s happened. There are some customers we’ve had to basically wait for six months to be able to charge for our services, because they have an existing contract, and we start implementation.

  • To all you regards saying $CRWD debacle will cause customers to move to $PANW due to their outage are WRONG. I work IT at a Fortune 100/500 company, and the friction of replacing all your cybersecurity infra is too large. Also, every large company has 3-5 year, multi-million $$$ cybersecurity contracts. We will obviously bargain for extra credits to make up for the downtime, but will not change vendors. Definitely not over a single outage that lasted less than 24 hours.

Position

I put my money where my mouth is. This ~ is about 20% of my portfolio, but I’m pretty confident about this play:

TLDR: I’m bearish going into earnings due to soft FY25 guidance. Platformization is still slowing down billings and revenue. My expectation is 11-12% growth, Wall St. is expecting 13.8%. Things will get worse before they get better, which I think will happen in FY25 Q3/Q4.