November 26, 2019 / 7:33 PM / 12 days ago

Palo Alto falls on disappointing profit forecast

(Reuters) - Shares of Palo Alto Networks fell nearly 11% after the cyber security company forecast disappointing second-quarter profit, prompting at least four brokerages to cut their price targets on weakness in its products business.

The company’s products unit, which sells firewalls and threat detection and prevention software, has come under pressure as more customers switch to the cloud.

Sales in the division fell nearly 4% in the first quarter ended Oct. 31, their first drop in at least 11 quarters.

J.P. Morgan said the magnitude and timing of the over stimulating focus on cloud security products left the firewall pipeline drained for the first quarter.

Palo Alto has looked to cushion the hit by going on an acquisition spree. The company bought IoT security providers Zingbox and Twistlock this year and said on Monday that it was buying Aporeto Inc for $150 million to strengthen its cloud security platform.

However, not all Wall Street analysts were bearish.

“Palo Alto’s customers may be migrating some of their security concerns away from its firewall appliances; however, we expect customers to remain with the company,” said Morningstar analyst Mark Cash.

The company said in September the increasing popularity of its cloud security tool, Prisma Access, had raised its confidence to achieve a 20% compounded annual growth rate for billings and revenue over the three-year period.

“We believe the company’s strategic view on security and centering their offering around machine learning and automated responses, will fuel its growth engine into future fiscal years,” Wedbush analyst Dan Ives said.

Reporting by Ambhini Aishwarya in Bengaluru

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