Palo Alto Networks stock remains Neutral-rated as price target increased on revised DCF

On Thursday, Palo Alto Networks (NASDAQ:PANW) saw its price target increased by Piper Sandler from $330.00 to $385.00, while the firm maintained a Neutral rating on the stock. The adjustment follows Palo Alto Networks' first-quarter results, which showed solid performance with an acceleration in Remaining Performance Obligations (RPO) growth. This growth was attributed to the company's platformization momentum and was complemented by better-than-expected top and bottom-line metrics.

The analyst from Piper Sandler highlighted the company's consistent RPO growth as a positive sign. However, they noted that while Palo Alto Networks maintained its full-year RPO expectations, it raised other metrics. This action was interpreted as a lowering of bookings expectations, which was seen as a disappointment for the quarter overall. Despite this, the analyst sees a balanced setup for Palo Alto Networks' stock moving forward.

The decision to maintain a Neutral rating while increasing the price target was explained by the analyst's view of the company's fundamental profile and valuation. The new price target of $385 reflects a forward-looking valuation based on a discounted cash flow (DCF) model that extends into Calendar Year 2029.

Palo Alto Networks is a global cybersecurity leader known for its comprehensive suite of security solutions. The company's focus on platformization and innovation in the cybersecurity space has been key to its growth. The latest financial results and the subsequent price target revision by Piper Sandler suggest that the company continues to execute its strategy effectively.

In other recent news, Palo Alto Networks showed a strong start to fiscal year 2025, reporting a 14% rise in total revenue to $2.14 billion and a 13% growth in earnings per share. The company's Next-Generation Security (NGS) Annual Recurring Revenue (ARR) saw a significant 40% increase, surpassing the $4.5 billion mark. However, calculated billings experienced a year-over-year decline of 14%, falling short of analyst projections.

Palo Alto Networks' recent acquisition of QRadar SaaS added $74 million to NGS ARR, contributing to the company's full-year revenue guidance. The company also launched the Prisma Access Browser, acquiring over 115 new customers, and expanded its portfolio with over 70 new platformizations. Palo Alto Networks raised its full-year guidance for NGS ARR, revenue, and EPS, reflecting confidence in its growth trajectory.

Analyst firms Citi, Rosenblatt Securities, Goldman Sachs, DA Davidson, and BTIG have adjusted their price targets and maintained a positive outlook on Palo Alto Networks. Citi raised its price target to $432, Rosenblatt to $425, Goldman Sachs trimmed it to $421, DA Davidson increased it to $435, and BTIG raised it to $414. These adjustments follow the company's first-quarter results, which demonstrated robust performance in several key metrics.

InvestingPro Insights

Palo Alto Networks' recent performance aligns with several key metrics and insights from InvestingPro. The company's revenue growth of 16.46% over the last twelve months, coupled with a strong EBITDA growth of 85.49%, underscores its solid financial performance mentioned in the article. This growth trajectory is further reflected in the stock's impressive 48.81% total return over the past year.

InvestingPro Tips highlight that PANW is trading near its 52-week high, which corresponds with the positive sentiment expressed in the analyst's price target increase. The company's status as a "prominent player in the Software (ETR:SOWGn) industry" aligns with its position as a global cybersecurity leader discussed in the article.

It's worth noting that while PANW is trading at high earnings and revenue multiples, it also has a low PEG ratio of 0.11, suggesting it might be undervalued relative to its growth prospects. This could provide context for the analyst's decision to raise the price target while maintaining a Neutral rating.

For investors seeking a deeper understanding of Palo Alto Networks' financial health and market position, InvestingPro offers 18 additional tips, providing a comprehensive view of the company's strengths and potential challenges in the evolving cybersecurity landscape.

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