Palo Alto Networks Inc. (NASDAQ:PANW) is a leading cybersecurity company known for its firewall appliances, software, and the Panorama platform, a solution designed to control, automate, and simplify global network security. The company also offers services such as threat prevention, malware and virus protection, URL filtering, DNS security, mobile and laptop security, and data loss prevention through a subscription model.
Founded in 2005, Palo Alto Networks serves a diverse range of customers, including those in education, energy, healthcare, financial services, internet and media, and government sectors. It has also been a favored stock pick of former House Speaker Nancy Pelosi.
Current Valuation and Performance
With a market capitalization of $100.8 billion, Palo Alto’s stock has underperformed the broader market this year, increasing by 8.9% year-to-date. The stock recently dropped 3.7% in a single session following the release of its quarterly results.
Earnings Overview
Palo Alto reported its fiscal Q3 results on May 20, showing a 15% year-over-year increase in revenue to $1.98 billion, surpassing estimates of $1.97 billion. Earnings per share also exceeded expectations, rising 20% year-over-year to $1.32, compared to the anticipated $1.25. Billings grew by 3% to $2.33 billion, aligning with the projected range of $2.3-$2.35 billion. The company also reported a strong free cash flow, up 22.6% year-over-year, with solid 12-month trailing FCF margins.
Despite these positive results, the stock fell more than 7% intraday due to disappointing guidance. Management forecasted Q4 revenue between $2.15-$2.17 billion and earnings per share of $1.40-$1.42. Billings for Q4 are expected to be $3.43-$3.48 billion, and for the full year, the top end of the billings forecast was slightly lowered from $10.2 billion to $10.18 billion.
Analyst Opinions
Analysts believe the market may have overreacted to the adjusted billings guidance. Evercore ISI analyst Peter Levine reiterated an “Outperform” rating with a target price of $385. Morgan Stanley analyst Hamza Fodderwala also maintained an “Overweight” rating with a price target of $360, noting that Palo Alto is outperforming its peers in billings growth.
Stifel and Wolfe Research analysts also remained bullish on PANW, with Stifel emphasizing that the upcoming F4Q will be critical as management provides its FY2025 guidance.
Consensus and Price Targets
Overall, analysts maintain a consensus “Strong Buy” rating on Palo Alto Networks. Out of 41 analysts tracking the stock, 28 rate it as a “Strong Buy,” 2 as a “Moderate Buy,” and 11 as a “Hold.” The mean price target for PANW is $333.51, suggesting an upside potential of 3.5% from current levels. The highest target price of $420 represents approximately 30% potential growth.
Featured Image: Megapixl
