On Tuesday, Rosenblatt Securities adjusted its price target for Palo Alto Networks (NASDAQ:PANW) stock, increasing it to $235 from the previous $212.50, while reaffirming a Buy rating. The cybersecurity giant, currently valued at $128.88 billion, is trading near its 52-week high of $207.24, with InvestingPro analysis suggesting the stock is trading above its Fair Value. The firm anticipates a robust second quarter for the fiscal year 2025, driven by several factors including a firewall refresh cycle, successful adoption of Cortex/XSIAM, and solid customer retention for Prisma Cloud.
Palo Alto Networks is scheduled to release its quarterly results on Thursday, February 13, 2025, after the market closes, with a conference call to follow at 4:30 pm ET. With impressive metrics including a 74.17% gross profit margin and 15% revenue growth in the last twelve months, InvestingPro subscribers have access to 15+ additional key insights about PANW’s financial health. Industry contacts have indicated strong performance for the quarter, which could lead to the company surpassing analyst expectations for revenue and earnings.
A significant deal with the UK Emergency Services Network, valued at over $120 million in annual recurring revenue, along with the integration of Cortex/XISAM into the company’s extensive firewall customer base, is expected to propel Next-Generation Annual Recurring Revenue (ARR) beyond the company’s projected growth range of 35%-36%. This reflects the effectiveness of Palo Alto Networks’ platform strategy in leveraging enterprise organizations’ vendor consolidation activities.
Rosenblatt has forecasted a 20% growth in Remaining Performance Obligations (RPO), aligning with both Street estimates and the company’s guidance of 20%-21%. Additionally, the firm anticipates a slight increase in revenue growth of 13% year-over-year, which is consistent with both Street estimates and the midpoint of the company’s guidance. This expectation is underpinned by a solid firewall refresh cycle currently underway.
The recent restructuring of sales leadership at Palo Alto Networks is expected to have a positive impact on operating margins, which are currently projected at 27.8%. This optimization is likely to result in earnings per share (EPS) outperforming Rosenblatt’s and Street’s estimate of $0.78, and exceeding the company’s guidance range of $0.77-$0.78. The strong performance anticipated for this quarter is also expected to have a favorable effect on the fiscal year 2025 guidance.
The new price target of $235 is based on a 14x enterprise value to calendar year 2026 estimated sales multiple, a revision from the previous target that was based on a 14.8x multiple for calendar year 2025 estimated sales. Currently trading at a P/E ratio of 46.39, InvestingPro data reveals the company maintains a moderate debt level with strong cash flows to cover obligations. This adjustment brings the valuation in line with the current average of the peer group, which has seen a multiple expansion of approximately 26% year-to-date. Rosenblatt justifies this expansion with Palo Alto Networks’ forecasted free cash flow (FCF) growth of 38%, surpassing the peer group’s average growth of 26%.
In other recent news, Palo Alto Networks has been the subject of several analyst reports. KeyBanc Capital Markets increased their price target on Palo Alto Networks to $240, maintaining an Overweight rating. The firm noted an optimistic sentiment among the company’s partners and an encouraging fiscal second-quarter setup. TD Cowen reiterated a Buy rating on Palo Alto Networks with a $210 target price, citing anticipation of a strong demand rebound for the company’s Next-Generation Security products.
RBC Capital Markets reaffirmed their Outperform rating and a $225 price target, highlighting strong performance from the company’s Cortex and XDR offerings. Barclays (LON:BARC) maintained an Overweight rating with a steady price target of $213, projecting approximately 9% year-over-year growth in second-quarter Remaining Performance Obligations bookings. RBC Capital Markets also noted that Palo Alto Networks is well-positioned to benefit from advancements in generative artificial intelligence, reporting AI Annual Recurring Revenue of approximately $250 million last quarter.
These recent developments underscore the analysts’ positive outlook on Palo Alto Networks, based on the company’s robust product offerings and strong performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.