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Investing.com - HSBC downgraded Palo Alto Networks (NASDAQ:PANW) from Hold to Reduce on Friday, maintaining its price target of $157.00. The cybersecurity firm, with a market capitalization of approximately $129 billion, has seen its shares decline nearly 10% over the past week.
The investment bank cited "limited scope for estimate upgrades" in fiscal years 2026-2027 as a key factor in its decision. HSBC noted that PANW shares currently trade at 47.1 times calendar year 2026 non-GAAP price-to-earnings ratio, compared to the sector’s median of 24.9 times. InvestingPro data confirms this valuation concern, with the stock’s current P/E ratio at a lofty 116 and multiple ProTips highlighting its high valuation multiples across various metrics.
HSBC’s price target implies approximately 22% downside potential for the cybersecurity company’s stock. The bank maintained its price target based on a PEG ratio of 2.3x and its long-term non-GAAP EPS compound annual growth rate estimate of 17.0%, reduced from a previous 17.5%. This contrasts with the broader analyst community, which maintains a consensus "Buy" recommendation with price targets ranging from $131 to $255.
The downgrade comes as HSBC projects decelerating revenue growth for Palo Alto Networks, contributing to what it describes as "an increased opportunity of a negative rerating" on the company’s shares.
HSBC calculated its target using its next-12-month non-GAAP EPS estimate of $4.02 for Palo Alto Networks, which was revised upward from a previous estimate of $3.91.
In other recent news, Palo Alto Networks reported impressive first-quarter fiscal 2026 results, with a 16% year-over-year revenue growth. The company’s remaining performance obligations increased by 24%, and next-generation security annual recurring revenue rose by 29%, slightly surpassing expectations. Stifel reiterated its Buy rating with a $225.00 price target, while BMO Capital maintained an Outperform rating with a $230.00 target, acknowledging the company’s revenue performance. Piper Sandler raised its price target to $230.00, highlighting Palo Alto Networks’ $3.4 billion acquisition of Chronosphere, which expands its reach into the observability market. Cantor Fitzgerald also reiterated its Overweight rating with a $250.00 price target, noting the company’s strong performance across various financial metrics. Bernstein SocGen Group raised its price target to $210.00, maintaining an Outperform rating, following the company’s revenue and annual recurring revenue exceeding guidance. These developments reflect Palo Alto Networks’ solid financial performance and strategic growth initiatives.
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