Palo Alto Networks stock rating upgraded to Buy by BofA on strong growth

Investing.com - BofA Securities upgraded Palo Alto Networks (NASDAQ:PANW) from Neutral to Buy on Tuesday, maintaining a $215 price target that represents 22% upside potential. According to InvestingPro data, the company maintains a "GOOD" Financial Health score, though it currently trades at elevated earnings and EBITDA multiples.

The upgrade follows strong performance metrics, with Next-Generation Security Annual Recurring Revenue (NGS ARR) growing 32.2% year-over-year, slightly exceeding Street estimates. Remaining Performance Obligation (RPO) increased 24.4%, surpassing Street expectations of 20.1%.

Product revenues rose 19.4% compared to Street forecasts of 14.7%, while operating margin came in 160 basis points above expectations. Free cash flow margin reached 37%, and the company’s guidance generally exceeded market expectations.

BofA Securities noted that Palo Alto Networks’ strategy "appears to be working well," highlighting 1,400 platform deals. Software (ETR:SOWGn) is increasingly driving growth, now accounting for 56% of product revenues compared to 44% last year. Want deeper insights? InvestingPro subscribers get access to 12+ additional exclusive ProTips and comprehensive financial analysis for PANW.

The upgrade comes as Palo Alto Networks stock has declined approximately 15% since the CyberArk acquisition announcement, creating what BofA Securities views as an attractive entry point given the company’s "solid fundamentals." Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value, with analysts setting price targets ranging from $130 to $236.

In other recent news, Palo Alto Networks reported strong fourth-quarter results, driving several analysts to adjust their ratings and price targets. Evercore ISI reiterated its Outperform rating with a $220 price target, highlighting the company’s robust performance across all metrics, particularly in software firewalls. Stifel also reaffirmed a Buy rating with a $225 price target, noting Palo Alto Networks’ accelerating bookings growth and a 24% year-over-year increase in remaining performance obligations. TD Cowen maintained its Buy rating with a $230 price target, citing the company’s strong fourth-quarter results and promising fiscal year 2026 outlook. Meanwhile, UBS raised its price target to $200 from $185, describing the quarter as a positive step following the Cybr acquisition. Guggenheim adjusted its price target to $135 from $130, maintaining a Sell rating but acknowledging results that were slightly better than expected. The company’s fiscal year 2026 guidance exceeded consensus estimates, further bolstering investor confidence. These developments reflect a generally positive sentiment among analysts regarding Palo Alto Networks’ recent performance and future prospects.

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