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On Wednesday, Jefferies reiterated its Buy rating on Palo Alto Networks (NASDAQ:PANW), maintaining a price target of $225.00. According to InvestingPro data, the company maintains a "GREAT" financial health score, though it currently trades at a premium valuation with a P/E ratio of 100.76. The firm’s assessment follows Palo Alto Networks’ reported growth in Remaining Performance Obligations (RPO), which increased by 19% year-over-year to $13.5 billion. This figure aligns with the company’s guidance of $13.5 to $13.6 billion. Bookings remained consistent with a 12% year-over-year growth, holding steady despite a 7-point tougher comparison from the previous year. The company’s revenue growth stands at 13.86%, with a robust five-year revenue CAGR of 23%.
Product revenue saw a significant increase of 16% year-over-year, surpassing consensus estimates by 8 points. On the other hand, subscription revenue growth was at 18%, slightly below expectations by 2 points. Management at Palo Alto Networks has expressed confidence in the stabilization of the macro environment compared to the volatility observed in April. This, combined with a robust pipeline, is anticipated to support the company’s aim for a 19-20% RPO growth in the fourth fiscal quarter.
Despite some metrics modestly falling short of expectations, the company’s commentary on free cash flow (FCF) has been positive. Management’s outlook suggests a strong trajectory leading to an estimated $4.5 billion in FCF by fiscal year 2027. This projection underpins Jefferies’ continued optimism in the stock’s performance and the reaffirmation of its price target. The analyst’s comments underscore the belief that the company’s solid financial indicators, particularly the expected free cash flow, will contribute to Palo Alto Networks’ valuation and investor confidence. With analyst targets ranging from $123 to $235, investors seeking deeper insights can access comprehensive analysis and 15+ additional ProTips through InvestingPro’s detailed research reports.
In other recent news, Palo Alto Networks reported earnings for its third fiscal quarter of 2025, slightly surpassing Wall Street’s expectations. The company achieved non-GAAP earnings per share of $0.80, above the forecasted $0.77, and reported revenues of $2.29 billion, marking a 15% year-over-year increase. Despite the positive financial results, the company’s stock saw a decline in after-hours trading due to weaker-than-expected growth in net new annual recurring revenue (NNARR) and remaining performance obligations (RPO). The cybersecurity firm also announced its acquisition of Protect AI, expected to close by the first quarter of fiscal 2026, as part of its strategic focus on AI and cloud security.
Analysts have shared varied perspectives on Palo Alto Networks’ performance and future outlook. Guggenheim reiterated a Sell rating, citing concerns over a consistent decline in total new annual recurring revenue and a valuation they consider high. Conversely, JPMorgan maintained an Overweight rating, noting the company’s better-than-expected operating profitability and a positive macro environment outlook. Goldman Sachs expressed optimism by raising the stock price target to $231, emphasizing the company’s strategic positioning in the cybersecurity industry.
Palo Alto Networks continues to focus on expanding its next-generation security offerings, with its next-generation security annual recurring revenue reaching $5.09 billion, reflecting a 34% growth from the previous year. The company also highlighted strong growth in product revenue, driven by advancements in its Cortex XSIAM and secure access service edge (SASE) products. As Palo Alto Networks navigates challenges and opportunities in the AI security space, it remains a key player in the evolving cybersecurity landscape.
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