Water, water, everywhere, but if hackers get their way, there might not a drop to drink.
On Monday, the U.S. Environment Protection Agency issued an enforcement alert outlining cybersecurity threats to community drinking water systems.
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The agency said that recent inspections of water systems found "critical cybersecurity vulnerabilities, such as default passwords that have not been updated and single logins that can easily be compromised."
On the same day the EPA issued its alert, cybersecurity company Palo Alto Networks (PANW) reported fiscal-third-quarter results.
During the company's earnings call with analysts, Chairman and Chief Executive Nikesh Arora said that "first and foremost, cyberattacks continue unabated."
"We're seeing a consistent stream of nation-state activity that is systematically looking for software supply chain and hardware zero-day vulnerabilities and attempting to exploit them at scale," he said.
Additionally, Arora sees a continued "robust stream of attack activity targeted at large enterprises and pieces of critical infrastructure."
Most organizations face the challenge of an ever-shrinking time window for a bad actor to enter their environments, find valuable data, and exfiltrate it, he said.
"The window is now measured in hours," Arora warned. "In comparison, the time it takes for an organization to discover a breach and stop the malicious activity continues to be measured in days and weeks."
And with the growth of artificial intelligence, Arora said, "We expect the attacks to come at an even faster pace."
Palo Alto is a big proponent of so-called cybersecurity platformization of its products as opposed to point solutions.
The strategy shift took a toll on the company's shares when it was announced in the February earnings report as Palo Alto Networks reduced its guidance.
PANW CEO: customer feedback 'nothing but encouraging'
"We firmly believe that answer is platformization of cybersecurity over time," Arora said. "I'm delighted to report, despite the concerns around our platformization approach after our last quarter, the customer feedback has been nothing but encouraging."
Palo Alto earned $1.32 a share, up 20% from a year earlier and beating analysts’ consensus forecast for $1.25 a share. Revenue totaled $2 billion, up 15% from a year earlier and coming in ahead of Wall Street’s call for $1.97 billion.
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Looking ahead, Palo Alto Networks forecast revenue of $2.15 billion to $2.17 billion as well as $3.43 billion to $3.48 billion in billings, which account for deferred revenue.
Analysts were looking for $2.16 billion and $3.45 billion, respectively.
"I just think billing is an artificial metric," Arora said during the call. "I understand you guys like it because it's been around for a long time. I think the cost of money has changed the quality of that metric."
He said that "a quality metric" is implied bookings or remaining performance obligation, "and in both those ... we saw an uptick this quarter."
Looking at the results, TheStreet Pro's Stephen Guilfoyle said that "the problem for a second consecutive quarter was in the guidance."
"For the current quarter, Palo Alto sees growth decelerating in both billings and revenue generation, which was the issue that last time the shares sold off so sharply in February," he said.
Prior to the earnings report Guilfoyle said that he had lost some faith in Palo Alto Networks several months ago, "the name I had once referred to as 'best in class.'" He'd beefed up his exposure to CrowdStrike (CRWD) .
"I have always maintained that cybersecurity is a space where, though valuations are off the chart, demand going forward will likely be inelastic, regardless of broad strength or weakness across the economy," he said.
Analyst sees 'transition growth quarter'
Several analysts issued research notes after the earnings report, including Wedbush's Dan Ives, who maintained his outperform rating and $375 price target.
“We would be buyers on any knee-jerk weakness this morning as this remains one of our favorite cybersecurity names to own over the next 12 to 18 months,” he said.
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Overall, Ives said, this is a transition growth quarter "that we would characterize as laying the foundation for a reaccelerating growth story into 2025 that will have tailwinds with Nikesh & Co. strategically navigating this next phase of the PANW growth story."
On May 15 Palo Alto Networks and IBM (IBM) unveiled "a broad-reaching partnership to deliver AI-powered security outcomes for customers," which included the acquisition of IBM's QRadar SaaS assets.
Ives said that Palo Alto Networks was making the right foundational growth moves, including the IBM announcement, "as the company is going through a near-term-pain-for long-term-gain strategy."
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Macquarie analyst Frederick Havemeyer said platformization and a new AI-product suite “are key to Palo Alto Networks’ growth strategy.”
Havemeyer raised his stock price target to $285 from $270 a share while maintaining his neutral rating.
Palo Alto Networks' "best-of-breed product suite across its three core platforms along with its new AI product suite positions it well over the long term as customers look to simplify their security architectures and consolidate vendors,” he said.
Bernstein analyst Peter Weed raised the firm's price target on Palo Alto Networks to $364 from $335 and affirmed an outperform rating on the shares.
Palo Alto's third-quarter earnings were largely in line on revenue expectations, beating the consensus by less than 1%, the analyst said.
Weed said that taking together slightly-below-consensus billings; the fiscal-Q4 revenue guide roughly in line with consensus, and a reemphasis that sees below-17% growth for several quarters into fiscal 2025, the stock was unable to hold up in after-hours trading.
The analyst said the platform is a work in progress.
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