Trump/Cook, Nissan weakness, more tariffs and gold - what’s moving markets
On Wednesday, Bernstein SocGen Group adjusted its price target for Palo Alto Networks (NASDAQ:PANW) shares, lowering it to $225 from $229, while maintaining an Outperform rating. Currently trading at $194.48, the stock shows a P/E ratio of 100.76, reflecting its premium valuation. Analyst Peter Weed provided insights into the company’s fiscal third quarter of 2025 performance, noting a slight beat on the closely watched Next-Gen Security (NGS) Annual Recurring Revenue (ARR), albeit narrower than previous quarters.According to InvestingPro analysis, PANW is currently trading above its Fair Value, though the company maintains a "GREAT" overall financial health score of 3.14/5. Despite the modest beat, Palo Alto Networks has forecasted strong quarter-over-quarter growth in NGS ARR for the fiscal fourth quarter, the most robust since the inception of their platformization strategy.
The company’s confidence, according to Weed, is not unfounded. With revenue growth of 13.86% over the last twelve months and a strong gross profit margin of 73.86%, the fundamentals support management’s optimistic outlook. Channel checks during the quarter corroborated the guidance, as did the company’s management, who confirmed that sales initially delayed by tariffs in the critical April closing period began to close rapidly after those concerns eased by mid-May. This rebound in demand appears to be back on track, suggesting that the earlier weak NGS ARR is not a cause for concern.
Weed also highlighted that similar weakness might be observed in other companies that closed their quarters in April. However, he pointed out additional positive signals for Palo Alto Networks, assuming there is no recession. He cited Microsoft (NASDAQ:MSFT)’s accelerating cloud migrations and AI projects as supportive of a 20%+ growth strength in the software firewall business. Although hardware firewalls are growing at a steady low single-digit rate, the increasing contribution from software firewalls, estimated at over 40% for the quarter, is expected to keep overall product revenue growth in the mid-teens. This represents a stronger performance than the mid-single-digit growth seen in the previous six quarters.
Furthermore, Palo Alto Networks’ exposure to U.S. Federal business in fiscal first quarter 2026 is seen as a limited risk, given that they are not facing a tough comparison from the previous year, their revenue base from U.S. Federal is less than 5%, and the business primarily consists of foundational NetSec renewal licenses, which are not impacted by seat count. Weed also suggested that the government’s focus on technology-delivered services could be a long-term tailwind.
Wrapping up his analysis, Weed projected that Palo Alto Networks could exit the fourth quarter with 15%+ top-line growth and potentially an additional 200 basis points or more improvement in fiscal year 2026. With analyst consensus remaining bullish at 1.87 (where 1 is Strong Buy) and price targets ranging from $123 to $235, the stock continues to attract attention despite its premium valuation.For deeper insights into PANW’s valuation metrics and growth prospects, including 15+ additional ProTips and comprehensive financial analysis, visit InvestingPro to access the full Pro Research Report.
In other recent news, Palo Alto Networks reported its third-quarter fiscal results, which generally aligned with expectations. The company experienced a $12 million revenue surplus, driven by a 16% year-over-year increase in product sales, although there was a minor shortfall in subscription revenues. The Next-Generation Security (NGS) Annual Recurring Revenue (ARR) saw a 34% year-over-year increase, slightly exceeding some analysts’ estimates. Despite these positive indicators, the company’s Free Cash Flow (FCF) for the quarter fell short of market expectations.
Analyst firms have maintained varying ratings on Palo Alto Networks. Piper Sandler and UBS both maintained a Neutral rating, citing a balanced outlook and mixed performance results. KeyBanc and Evercore ISI expressed more confidence, with KeyBanc maintaining an Overweight rating and Evercore ISI raising its price target to $220.00. Meanwhile, BTIG also maintained a Neutral rating, noting some confusion around the softness in subscription and support revenue.
Palo Alto Networks’ management has provided a fourth-quarter forecast consistent with prior estimates, and they have modestly raised their fiscal year 2025 revenue forecast. The company has also reiterated its fiscal year 2026 and 2027 free cash flow margin targets of over 37%. Despite some challenges, the company anticipates continued growth in its product offerings, particularly in areas like artificial intelligence and virtual firewalls.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.