Raymond James downgraded shares of Palo Alto Networks (NASDAQ:PANW) to Market Perform from Outperform in a note Monday, removing its price target of $260 per share for the stock.
The investment bank cited several factors for the downgrade, including stretched valuation, an expected plateau in financing receivables, and increased pressure to close deals into the current industrywide digestion period.
"To be clear, Palo Alto Networks is a great company, technology leader, execution has been stellar, and we don't fight investors that have a time horizon longer than our 12-month mandate," wrote the analysts. "However, we believe the risk/reward in the stock is becoming less favorable."
The analysts also noted that Palo Alto is implementing a new channel strategy. "This occurs as Palo implements a recently announced channel strategy to reduce the number of strategic partners where our checks suggest a continued battle with deal-registration that creates an opening for competitors," they wrote.
Despite the downgrade, analysts at Raymond James are still cautious about their downgrade, noting that "betting against Palo Alto can be considered akin to tugging on Superman’s cape, spitting in the wind, or pulling the mask off the old Lone Ranger."
Even so, they believe this is a "rare moment" with "idiosyncratic headwinds forming alongside record valuation" pushing the firm to the sidelines.