On Monday, JPMorgan analyst Brian Essex increased the price target on Palo Alto Networks (NASDAQ:PANW) shares to $225.00, while reaffirming an Overweight rating on the cybersecurity firm. The new target sits within the current analyst range of $123 to $235, with the stock currently trading near $193. Essex’s assessment is based on industry discussions that indicate robust deal activity on Palo Alto Networks’ platform. These observations suggest the company is poised for strong fiscal third-quarter results, with earnings scheduled for May 20.
Palo Alto Networks is expected to benefit from solid traction in its core Firewall and Prisma SASE offerings. The recent collaboration between Wiz and Google (NASDAQ:GOOGL) is also anticipated to provide an additional boost to Prisma Cloud throughout the year. With a robust revenue growth of 13.86% and a market capitalization of $127.77 billion, the company is forecasted to report healthy growth in Next-Generation Security (NGS) Annual Recurring Revenue (ARR), Remaining Performance Obligations (RPO), and Earnings Per Share (EPS), along with an uptick in billings, revenue, and free cash flow (FCF) for the quarter. According to InvestingPro, the company maintains a "GREAT" financial health score of 3.13, with 13 additional key insights available to subscribers.
Essex also noted that Palo Alto Networks has been capitalizing on a potential industry-wide firewall spending cycle. The company’s recent strategic partnerships with T-Mobile and AT&T are expected to support future growth. While investors are keen on RPO growth, which could surpass 20% this quarter, Essex believes that the potential for operating margin expansion is not fully recognized by the market. He suggests that Palo Alto Networks is reaching a point of improved cost efficiencies across its platform.
The analyst’s confidence in Palo Alto Networks is further bolstered by the company’s ability to leverage its business model for continued delivery on its projection of 37% or higher FCF margins. With a strong levered free cash flow of $2.93 billion and moderate debt levels, this operational leverage is a key factor in supporting the raised price target and maintaining a positive outlook on the stock’s performance.
In other recent news, Palo Alto Networks has been the focus of several analyst reports and strategic developments. The cybersecurity company is set to release its fiscal third-quarter results on May 20, with analysts from TD Cowen predicting a favorable outcome, anticipating a year-over-year growth of approximately 14.9%. KeyBanc Capital Markets has raised its price target for Palo Alto Networks to $220, citing potential growth in the second half of the fiscal year due to product launches and strategic shifts. Meanwhile, Jefferies has increased its price target to $225, maintaining a Buy rating, driven by the company’s expected performance in Remaining Performance Obligations (RPO) and Annual Recurring Revenue (ARR).
Stifel analysts have retained a $225 price target, expressing cautious optimism based on feedback from cybersecurity Value-Added Resellers. Mizuho has reaffirmed its Outperform rating and a $225 price target following Palo Alto Networks’ acquisition of Protect AI, a move aimed at enhancing AI cybersecurity capabilities. The acquisition is seen as a strategic step to strengthen the company’s position in the market and expand its security offerings. Analysts expect Palo Alto Networks to reaffirm its fiscal year 2025 guidance, with a focus on maintaining Free Cash Flow margins between 37-38%. These developments reflect a broad confidence among analysts in Palo Alto Networks’ strategic initiatives and financial outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.