After falling 7% on Friday, shares of Palo Alto Networks (PANW) are once again under pressure on Monday following news that its head of sales is leaving. This comes after several other executive shake-ups in the past year. Removing the stock from his firm's Best Idea List, Guggenheim analyst Imtiaz Koujalgi said that while the risk/reward is "even more attractive" following the selloff in the shares, he is concerned about the near-term given the uncertainty around various metrics going forward. Still bullish on the stock, his peer at Dougherty called Friday’s underperformance "an overreaction."
HEAD OF SALES LEAVING: A Palo Alto Networks spokesperson has confirmed that Dave Peranich, executive vice president of worldwide sales, is leaving the company, The Information's Kevin McLaughlin reported on Friday. Peranich will stay on until the end of September and a search is underway for his replacement, the spokesperson added. A year ago, the company replaced its former CEO Mark McLaughlin with former SoftBank (SFTBY) and Google (GOOGL) executive Nikesh Arora. In October, it replaced former President Mark Anderson with former Google executive Amit Singh.
PALO ALTO REMOVED FROM BEST IDEA LIST: In a research note following the news, Guggenheim's Koujalgi reiterated a Buy rating on Palo Alto Networks but removed the stock from its firm's Best Idea List. While the analyst acknowledged that the risk/reward is "even more attractive" after the 7% decline on Friday, the analyst noted that he is concerned about the near-term given the uncertainty around various metrics going forward, namely billings, cash flow, margins, and how the stock would react to the potential downside to those numbers, Further, Koujalgi argued that a change like the departure of the head of sales always introduces some risk of disruption. His checks for this quarter indicated a slight downtick in momentum from last quarter, but he thinks the bar is not aggressive, and Palo Alto "should be able to print numbers ahead of the Street."
SELLOFF 'AN OVERREACTION': Also commenting on the EVP departure, Dougherty analyst Catharine Trebnick told investors in a research note of her own that she views the selloff on the news Dave Penanich will be leaving the company as an "overreaction" to the direction being set by the relatively new CEO, Nikesh Arora, who took over in June of 2018. Trebnick added that she has not picked up any negative data from her contacts since the article surfaced on Friday. The analyst reiterated a Buy rating and a $300 price target on the shares.
PRICE ACTION: In morning trading, shares of Palo Alto Networks have slipped almost 2% to $195.98, extending Friday's losses.
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