What Has Analysts Excited About Palo Alto Networks?

Palo Alto Networks Inc. (NYSE: PANW) released its most recent quarterly report after the markets closed on Monday. Although results topped estimates, investors still decided to send shares lower. However, analysts remain positive on the stock.

The cybersecurity firm said that it had $1.55 in earnings per share (EPS) on $1.0 billion in revenue in the fiscal second quarter. That compares with consensus estimates of $1.43 in EPS and revenue of $985.68 million, as well as the $1.19 per share and $816.7 million posted last year.

Looking ahead to the fiscal third quarter, the company expects to see EPS in the range of $1.27 to $1.29 with revenue between $1.05 billion and $1.06 billion. Analysts are calling for EPS of $1.28 on $1.05 billion in revenue in revenue for the coming quarter.

Management noted that the momentum in the business continues to be strong, with second-quarter revenue growth of 25% year over year to over $1 billion, driven by strong execution across the board. The firm added that it is well positioned to protect customers and that its three-platform strategy is paying off.

BofA Securities noted in its report:

Growth is solid reflecting a successful transition from hardware to software, with next-generation firewall (NGFW) product revenue down from 39% of revenue in 2Q19 to 29% in 2Q21 while subscription revenues grew from 32% to 37%, respectively. We reiterate our Buy and see multiple catalysts for the stock, mainly around continued growth of the Cloud and artificial intelligence (AI) segment which management expects to grow 90% YoY in 2021, partially inorganically. We increase our estimates to capture the momentum and raise our PO from $415 to $445 still on about 8x CY22 EV/S estimate.

Here’s what a few other analysts had to say about the stock:

  • RBC reiterated an Outperform rating and raised its price target to $445 from $425.
  • Piper Sandler reiterated its Overweight rating on the shares.
  • D.A. Davidson reiterated a Buy rating and raised its target to $450 from $325.
  • Deutsche Bank reiterated it as Outperform and raised its target price to $426.
  • BMO Capital Markets upgraded it from Market Perform to Outperform with a $455 target.

Palo Alto Networks stock traded down about 2% on Tuesday to $376.45, in a 52-week range of $125.47 to $403.00. The consensus price target is $404.24.

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