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After the close on Monday February 22 Palo Alto Networks (PANW) reported a loss of $1.42 million (or $1.48 a share) on revenue of $1.02 billion million for the company’s fiscal second quarter. Adjusted earnings–which exclude share-based compensation and other items, were $1.53 a share. Revenue grew by 25% year over year. Wall Street had been looking for adjusted earnings of $1.43 a share on revenue of $986 million. Billings for future orders ross to $1.21 billion from $999 in the year ago wearer. Analysts had forecast billings of $1.18 billion.

But the shares fell in after hours trading when in its conference call the company forecast adjusted earnings of $1.27 to $1.29 a share on revenue of $1.05 to $1.06 billion for the fiscal third quarter. Analysts were looking for adjusted earnings of $1.29 a share on revenue of $1.05 billion for the fiscal third quarter. For the full fiscal year Palo Alto Networks forecast adjusted earnings of $5.80 to $5.90 a share on revenue of $4.15 billion to $4.2 billion. Wall Street had been looking for $5.79 a share in adjusted earnings on revenue of $4.12 for the year.

It’s not all that surprising that shares of a company that trades at 65 times forward earnings per share would retreat when it failed to raise growth projections above Wall Street’s current consensus.

Palo Alto Networks is a classic growth momentum stock that’s counting on continued future growth in demand for cyber security software and services to justify its current stock price.

And the fact that the company is only profitable if you don’t count all the stock it is issuing to employees as an expense–You don’t mean to say that these shares its handing out have value?–should give an investor pause in the current market. We’ve been down this road with technology companies before and while this kind of accounting doesn’t always end in tears, it only works as long as the company can “pay” its workers in stock that they believe will be more valuable tomorrow.

(It is also worrisome for investors who are inclined to worry about “growth accounting” at a growth stock that Palo Alto continues to fuel its growth through acquisitions. Last week the company announced that t would buy cloud-security company Bridgecrew for $157 million.)

On the plus side of the ledger–and the reasons that I’m keeping this company in my Jubak Picks Portfolio and my long-term 50 Stocks Portfolio–are the never-ending (it seems) gift from the news cycle to cyber security companies. The most recent gif has been the SolarStorm hack of the SolarWinds (SWI) Orion IT software that compromised a huge number of corporate and government networks. In its conference call Palo Alto’s CEO said “The SolarStorm attack highlighted enterprises need a comprehensive up-to-date map of their full IT infrastructure environment, including understanding their own networks as well as external attack surfaces and supply chains.” But the company really didn’t need belabor the point.

In addition, and just as important for Palo Alto’s future business, the company is showing very positive signs that it continues to grow beyond its original base of firewall network security to the expanding market for cloud security and security automation systems. The older firewall appliance continues to generate abundant free cash flow that the company is using to grow the cloud and automation security business. In the fiscal second quarter product sales increased 3% while subscription and support revenue grew 34% year over year.Total billings grew 22% year over year with firewall platform billings increasing by 21%. Billings for the next generation cloud and security automation bins grew by 59% year over year to represent 25% of total billings (up from 19% in the year ago quarter.)

The recent volatility in the stock during last week’s selling should be a reminder of the potential downside here. But right now, I think the very strong upside story justifies continuing to hold the shares. As of March 1, I’m raising my target price to $410 a share from $260. The stock closed at $367.39, up 2.53%) on March 1.

I initiated my position in Palo Alto Networks in my Jubak’s Picks Portfolio on June 27, 2019. The shares are up 78.8% since then. My position in the 50 Stocks Portfolio dates to January 21, 2020. The shares are up 51.1% since that date.