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On Wednesday, FBN Securities sustained its Outperform rating on Palo Alto Networks (NASDAQ:PANW) stock with a steady price target of $225.00. According to InvestingPro data, the company maintains a "GREAT" financial health score, with analysts’ consensus remaining firmly bullish. The stock is currently trading near its Fair Value, though at relatively high earnings multiples. The firm’s analysis followed Palo Alto Networks’ release of its fiscal third-quarter earnings, which displayed a 15% year-over-year revenue increase. This slight 0.4% beat above consensus was accompanied by a 19% year-over-year rise in remaining performance obligations (RPO), aligning with market expectations. With a substantial market capitalization of $120.58 billion and trailing twelve-month revenue of $8.57 billion, Palo Alto Networks continues to demonstrate its prominence in the cybersecurity sector.
The company’s calculated RPO, a metric indicating future revenue, grew by 16% year-over-year. Additionally, Palo Alto Networks’ next-generation security annual recurring revenue (NGS ARR) climbed by 34% year-over-year, slightly surpassing expectations by 0.6%. The earnings per share for next-generation security (NG EPS) reached $0.80, exceeding consensus by $0.03.
Despite these positive outcomes, FBN Securities anticipates some potential profit-taking in Palo Alto Networks shares due to the stock’s substantial one-month increase from approximately $160 to $194.48 the day before. The firm noted that while the company’s key metrics continued to beat expectations, the magnitude of these beats was less impressive compared to recent quarters. For instance, the revenue beat decreased from the 0.8%-0.9% range in the prior two quarters to 0.4%.
Moreover, the next-generation gross margin percentage (NG GM%) for Palo Alto Networks showed a year-over-year and quarter-over-quarter decline to 76.0%, falling 1.0 percentage point below FBN Securities’ estimate. Additionally, the growth of subscription revenue decelerated to 18% year-over-year from 20% in the previous quarter, despite a 1 percentage point easier comparison. For deeper insights into Palo Alto Networks’ valuation and growth metrics, including 13 additional ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, Palo Alto Networks has reported its fiscal third-quarter results, which have drawn mixed reactions from analysts. The company saw a notable increase in Next-Generation Security Annual Recurring Revenue (NGS ARR), with a year-over-year growth of 34%, and total revenue rising by 15%. However, Remaining Performance Obligations (RPOs) were at the lower end of guidance, slightly missing consensus expectations. DA Davidson maintained a Buy rating with a $225 price target, noting that while some metrics were below expectations, others like Annual Recurring Revenue (ARR) exceeded them.
Cantor Fitzgerald also maintained an Overweight rating, with a $223 price target, highlighting Palo Alto Networks’ strong performance in revenue, Next-Gen ARR, and Earnings Per Share (EPS). TD Cowen reiterated a Buy rating and a $230 target, emphasizing the company’s solid results and potential for growth in artificial intelligence solutions. Meanwhile, Stifel analysts upheld a Buy rating with a $225 target, despite some figures not meeting forecasts, praising the company’s strategic focus on platformization.
Truist Securities reaffirmed a Buy rating with a $205 target, acknowledging Palo Alto Networks’ execution amid a challenging macroeconomic environment. The company has maintained its guidance for fiscal year 2025, with raised expectations for revenue, operating margin, and adjusted free cash flow margin. These developments suggest that Palo Alto Networks is on a positive trajectory, with analysts expressing confidence in its strategic initiatives and market position.
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