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On Friday, Baird increased the price target for shares of Palo Alto Networks (NASDAQ:PANW) to $375 from $365, while reaffirming an Outperform rating on the stock. The adjustment comes ahead of the cybersecurity company's fourth-quarter fiscal year 2024 results, which are scheduled to be reported on Monday, August 19, 2024.
The firm's analyst highlighted a shift in investor focus towards Remaining Performance Obligations (RPO) and Free Cash Flow (FCF) guidance, as revenue and billings expectations have moderated. The analyst noted the stock's recent performance, which saw an 8.1% increase last week, surpassing the iShares Expanded Tech-Software Sector ETF (IGV) by approximately 3.6 percentage points.
Despite the stock's valuation returning to its highs, which suggests high investor expectations, the analyst expressed a cautious stance in the short term, especially considering the ongoing volatility in billings.
However, Baird remains positive about Palo Alto Networks' medium-to-long-term growth and FCF prospects. This optimism is supported by channel checks and field work that indicate strong momentum in large deals and a robust pipeline.
The analyst expects that these factors will contribute to the RPO growth trending towards mid-20s percentage levels by the end of the fiscal year 2025. The company's upcoming earnings report is anticipated to provide further insights into its financial performance and strategic direction, which are key drivers of the stock's future trajectory.
Palo Alto Networks has drawn the attention of several analyst firms ahead of its fiscal fourth quarter results. Evercore ISI has maintained its Outperform rating and a price target of $385.00, despite expressing a short-term cautious stance due to mixed signals from a quarterly partner survey and investor sentiment.
On the other hand, JPMorgan, expecting a robust Q4 driven by large-deal activity and strong demand for products like SASE/Prisma Access and Cortex, has maintained an Overweight rating and raised the shares target to $365.
Scotiabank has raised the price target for Palo Alto Networks to $385 while maintaining a Sector Outperform rating, based on signs of a potential hardware refresh cycle for the company and stable or slightly improved business performance. Citi has also increased the price target for Palo Alto Networks to $385, maintaining a Buy rating, on expectations of a recovery in firewall sales and a prolonged period of hardware refresh cycles.
Mizuho raised the price target for Palo Alto Networks to $380, attributing the adjustment to a noticeable rise in demand for the company's offerings.
InvestingPro Insights
As Palo Alto Networks (NASDAQ:PANW) gears up to release its fourth-quarter fiscal year 2024 results, InvestingPro data offers a glimpse into the company's financial health and market position. With a robust market capitalization of $111.15 billion and a high Price / Book ratio of 24.88, Palo Alto Networks stands out as a prominent player in the software industry. The company's revenue growth remains strong, with a notable 20.05% increase over the last twelve months as of Q3 2024. This growth is underpinned by a significant gross profit margin of 74.43%, showcasing the company's efficiency in maintaining profitability.
InvestingPro Tips highlight that Palo Alto Networks is expected to see net income growth this year, which aligns with Baird's positive outlook on the company's growth and free cash flow prospects. Additionally, the company has demonstrated a high return over the last year with a 60.43% price total return, reflecting investor confidence and market performance. For readers interested in a deeper analysis, InvestingPro offers additional tips, including insights on the company's debt levels, valuation multiples, and profitability forecasts. In total, there are 15 more InvestingPro Tips available that provide a comprehensive view of Palo Alto Networks' financial and market status.
As investors and analysts await the upcoming earnings report, these metrics and insights may prove valuable in assessing the company's potential and informing investment decisions. With the stock trading at a high earnings multiple, it is essential to consider both the growth opportunities and the valuation to understand the full picture of Palo Alto Networks' investment profile.
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