Thread regarding Palo Alto Networks Inc. layoffs

We will see whether this recent sell off was a buying opportunity

12:41 PANW Palo Alto Networks breaks down on report of sales executive departure (195.99 -3.28)

Shares of software security leader Palo Alto Networks (PANW) are extending Friday's declines following a report that the company's Vice President of sales will be leaving the company.

The stock fell 7% on Friday, breaking support at the 50-day moving average, after The Information reported that the company confirmed the departure of Vice President of Sales Dave Peranich, effective next month.

The stock fell to a level not seen since January before reclaiming support at the June lows intraday.

This does seem like a rather dramatic move for the loss of an executive that is not in the C-suite. However, this is not the first sales executive to leave this year after Nikesh Arora took over as Chief Executive just over a year ago.

Sales professional turnover can lead to disruptions at software companies. Go-to-market, or "sales execution" issues are a common excuse to Wall Street after a software company misses estimates or issues a disappointing outlook. That said, management turnover is quite common under the direction of a new Chief Executive.

Palo Alto Networks business continues to perform well as cybersecurity remains a top priority for pretty much any enterprise. The company has exceeded estimates on the top and bottom line for nine consecutive quarters and guided revenue above expectations for four consecutive quarters.

Last quarter, the company reported another strong showing as revenue grew 28% on top of 31% growth in the prior year. EPS guidance was a little soft, complicated by two tuck in acquisitions.

Palo Alto acquired the leader in container security, Twistlock, for $410 mln in cash and a leader in serverless security called PureSec. Acquisitions are another potential distraction for management, although investors should cheer strategic deals that strengthen the company's long-term position in a competitive and constantly evolving software security market.

Palo Alto Networks will report fiscal fourth quarter results on the afternoon of September 4. The company guided for EPS up 10.5% to $1.41-1.42 with revenue up 22% to $895-805 mln.

Unlike some newer high-flying software security stocks posting stronger growth, Palo Alto's valuation is quite reasonable. With a $19 bln market value, the stock trades at ~20x EBITDA, 17x FCF, and 5x sales estimates. Recent IPO CrowdStrike (CRWD) currently has a $20 bln valuation and trades more than 40x this year's sales estimates.

Supply/demand dynamics (a small float) are helping to drive CRWD stock higher near term, but Palo Alto's valuation appears much more sustainable than CrowdStrike's.

We will see whether this recent sell off was a buying opportunity when the company reports fourth quarter results in just over two weeks.

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