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On Friday, Jefferies analyst Joseph Gallo updated the firm’s outlook on Palo Alto Networks (NASDAQ:PANW), increasing the price target to $225 from the previous $215 while maintaining a Buy rating on the stock. The adjustment reflects confidence in the cybersecurity company’s ability to meet its third fiscal quarter top-line metrics, including Remaining Performance Obligations (RPO), Annual Recurring Revenue (ARR), and Revenue. According to InvestingPro data, PANW has demonstrated strong momentum with a 21.8% return over the past year, though current valuations suggest the stock is trading above its Fair Value.
The analyst’s optimism is partly due to the broader cybersecurity industry’s performance in the first calendar quarter, which showed resilience against macroeconomic pressures and exhibited strong product growth, particularly in the enterprise segment. This trend is expected to positively impact Palo Alto Networks’ financial results. The company’s robust financial health is reflected in its GREAT overall score from InvestingPro, with revenue growing at 13.9% and maintaining a healthy gross profit margin of 73.9%.
The focus for investors and analysts will also include Palo Alto Networks’ Free Cash Flow (FCF) margin and the company’s progress toward its fiscal year 2025 target of 37-38%. The new price target of $225 is based on a multiple of 33 times the company’s expected enterprise value to fiscal year 2027 free cash flow, which is estimated to be around $4.5 billion. Supporting this target is a robust year-over-year RPO growth of approximately 20%.
Gallo’s commentary highlights the strong growth in RPO as a key driver for the revised price target, indicating that Palo Alto Networks is well-positioned to capitalize on the expanding demand for cybersecurity solutions. The firm’s analysis suggests that Palo Alto Networks’ strategic initiatives and financial performance are on track to meet long-term financial goals.
In other recent news, Palo Alto Networks announced its acquisition of Protect AI, a company specializing in AI and machine learning security, with the deal expected to close by the first quarter of fiscal 2026. This acquisition is anticipated to enhance Palo Alto Networks’ AI cybersecurity capabilities, integrating Protect AI’s solutions into its Prisma AIRS platform. Mizuho (NYSE:MFG) has maintained its Outperform rating for Palo Alto Networks, with a price target of $225, viewing the acquisition as a strategic move to address growing AI security concerns. Similarly, Truist Securities has reiterated a Buy rating, keeping a $205 price target, highlighting the enhancement of Palo Alto’s security platform in the AI sector.
In addition to the acquisition, Palo Alto Networks has launched Cortex XSIAM 3.0, an upgrade to its security operations platform, which promises to transform traditional vulnerability management and email security. The platform has already achieved over $1 billion in cumulative bookings, marking it as the company’s fastest-growing product. Furthermore, Palo Alto Networks introduced the Prisma AIRS platform, designed to provide comprehensive protection across the AI ecosystem, addressing emerging security challenges. These developments underscore Palo Alto Networks’ commitment to innovation in AI-powered security solutions, as emphasized by company executives.
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