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After the close on Monday, August 22, Palo Alto Networks (PANW) reported fiscal fourth-quarter (adjusted) earnings of $2.39 a share. Analysts had projected $2.28 a share. Revenue climbed 27% to $1.6 billion.

On a GAP basis (generally accepted accounting principles), the cyber-security company remains in the red, but Palo Lato said it would turn GAP profitable in fiscal 2023.

For fiscal 2023 the company forecast adjusted earnings in a range of $9.40 to $9.50 a share, compared with Wall Street estimates of $9.23. Palo Alto said it expects fiscal 2023 revenue in a range of $6.85 billion to $6.9 billion. Palo Alto forecast billings in a range of $8.95 billion to $9.05 billion for the fiscal year. Analysts had projected revenue of $6.74 billion and billings of $8.56 billion.

Revenue growth of 27% year-over-year came from 20% growth in product sales and 30% growth in subscriptions and support revenue. Billings and subscription /service obligations both grew by more than 40%. Firewall as a platform billings grew by 26% year over year with software accounting for 48% of firewall billings.

I think these numbers are evidence of Palo Alto’s continued successful progress toward subscription revenue and cloud-based security platforms. In fiscal 2023, Palo Alto said it expects next-generation annual recurring revenue of $2.625 billion, up 38%, against Wall Street estimates of $2.46 billion.

The stock is fairly valued in my estimation, but it remains a Wall Street favorite in one of Wall Street’s favorite technology sectors–cyber security. Morgan Stanley, for example, has said it expects the stock to be added to the Standard & Poor’s 500 in 2023. (Since the company isn’t yet profitable, calculating a price-to-earnings ratio is somewhat problematic. The stock trades at a price-to-sales ratio of 10.2 and a price-to-book ratio of 270. I do worry about a big tumble in the stock if another leg down in the Bear market clearly emerges. I’m not expecting that until 2023 so at the moment I say hold but watch carefully.)

Palo Alto Networks is a member of my Jubak Picks Portfolio. The shares are up 177.12% since I added them to that portfolio on June 27, 2017. The stock is also a member of my extremely long-term Millennial Portfolio (for investors with more time than money) on my subscription site. That position is up 56.65% since May 21, 2021.

The stock is up 2.29% for 2022 to date as of the close on August 23.