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On Wednesday, Guggenheim reiterated a Sell rating on Palo Alto Networks (NASDAQ:PANW) stock, maintaining a price target of $130.00. According to InvestingPro data, the stock currently trades near $194.48, with analyst targets ranging from $123 to $235, reflecting mixed market sentiment about this prominent player in the software industry. The firm’s analysis pointed out a consistent trend in the company’s performance, noting a year-over-year decline in Total (EPA:TTEF) New Annual Recurring Revenue (ARR) for the seventh consecutive quarter. This ongoing decline comes despite comparisons to weaker prior periods. However, InvestingPro data shows the company maintains strong fundamentals with revenue growth of 13.86% over the last twelve months and an overall Financial Health Score of "GREAT."
Palo Alto Networks’ results for the third fiscal quarter of 2025 (F3Q25) were subdued, which also influenced mixed guidance for the fourth fiscal quarter (F4Q25). The guidance might include contributions from the anticipated acquisition of Protect AI, expected to close by the first fiscal quarter (F1Q). Despite the after-hours stock price decrease of 4% following these results, Guggenheim observed that the stock often recovers quickly from such dips.
The research firm highlighted that Palo Alto Networks has been packaging products together at significant discounts for years, a practice also common among competitors like CrowdStrike (NASDAQ:CRWD) and Cisco Systems (NASDAQ:CSCO). The company’s recent emphasis on artificial intelligence as a key growth driver was noted as a new strategic focus during the conference call.
Guggenheim expressed skepticism about the company’s valuation, which is currently at 17 times the enterprise value to next twelve months (EV/NTM) recurring revenue multiple. InvestingPro analysis indicates the stock is currently overvalued, trading at a P/E ratio of 100.76 and an EV/EBITDA multiple of 89.08. Discover more valuable insights about PANW and 1,400+ other stocks with InvestingPro’s comprehensive Research Reports. The firm cited concerns about moderating revenue growth and the potential continuation of this trajectory into the next year due to the declines in this year’s New ARR. Despite acknowledging Palo Alto Networks’ strong management team and best-in-class free cash flow margins, Guggenheim’s stance remains a Sell with a $130 price target.
In other recent news, Palo Alto Networks has reported its third-quarter earnings, showcasing a slight beat over Wall Street forecasts. The company posted non-GAAP earnings per share of $0.80, exceeding the consensus estimate of $0.77, and reported revenue of $2.29 billion, just above the expected $2.28 billion, marking a 15% year-over-year increase. Despite these positive results, the stock experienced a decline in aftermarket trading. Analysts at JMP Securities maintained a Market Outperform rating with a $212.00 price target, while Goldman Sachs raised its price target from $215.00 to $231.00, reflecting optimism about the company’s strategic positioning.
Palo Alto Networks continues to focus on its next-generation security products, with annual recurring revenue reaching $5.09 billion, representing a significant 34% growth from the previous year. The company is also investing in artificial intelligence (AI) security, as demonstrated by its recent acquisition of Protect AI, expected to close in the first quarter of 2026. This acquisition aligns with Palo Alto Networks’ strategy to capitalize on the emerging AI security market. Additionally, JPMorgan adjusted its price target for the company to $221.00, maintaining an Overweight rating, despite concerns over weaker-than-expected growth in net new annual recurring revenue and remaining performance obligations.
Palo Alto Networks’ strategic efforts include a focus on software-based solutions and cloud security, with a transition to contract manufacturing in Texas underway. The company has reiterated its full-year guidance and raised the lower end of its forecasts for revenue, operating margin, and free cash flow. Analysts at Goldman Sachs view Palo Alto Networks as one of the key players poised to lead enterprise security discussions and consolidate spending in the medium term.
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