On Wednesday, Rosenblatt Securities adjusted its outlook on Palo Alto Networks (NASDAQ:PANW) shares, a global cybersecurity leader. The firm increased the price target to $300 from $265, while maintaining a Neutral rating on the stock.
Palo Alto Networks is gearing up to announce its third quarter financial results for fiscal year 2024 on May 20th, after market close. A conference call is scheduled to follow at 4:30 pm ET. Rosenblatt's current estimates for the quarter have not changed, projecting a steady performance for the company.
Expectations include a 2% increase in billing growth, a 13% year-over-year revenue growth, a 13% decrease in product revenue, and a significant 42% growth in Next-Generation Annual Recurring Revenue (ARR).
The firm's guidance for the quarter is seen as attainable, and insights from channel discussions indicate that the competitive landscape has remained consistent across Palo Alto Networks' three main platforms.
Feedback from Chief Information Security Officers (CISOs) and resellers points to robust sales in Secure Access Service Edge (SASE), although there is noted pricing pressure on firewall products.
Additionally, Palo Alto Networks' Security Operations (Sec Ops) offering, Cortex, is gaining traction despite competition from companies like Torq.
There is also an increasing interest in the company's Prisma Cloud service, spurred by a new wave of cloud security Requests for Proposals (RFPs) that demand more functionality.
The revised price target reflects a change in valuation multiples, from 9 times to 10.2 times enterprise value to projected calendar year 2025 sales (EV/CY25E sales).
This adjustment comes even as the stock is trading slightly above the new valuation at 10.4 times EV/CY25E sales.
InvestingPro Insights
As Palo Alto Networks (NASDAQ:PANW) approaches its third-quarter financial report, real-time data and analysis from InvestingPro offer additional context for investors. The company's market capitalization stands at a robust $97.31 billion, reflecting its significant presence in the cybersecurity sector. With a high Price/Earnings (P/E) ratio of 41.08 and a Price/Book (P/B) ratio of 22.33, the stock is trading at premium valuation multiples, suggesting that the market has high expectations for the company's future performance.
InvestingPro Tips highlight that Palo Alto Networks is expected to see net income growth this year, indicating potential upside for investors. However, it's worth noting that 31 analysts have revised their earnings downwards for the upcoming period, which could signal caution. Moreover, the company has demonstrated a high return over the last year, with a 56.24% price total return, showcasing its strong past performance. For investors seeking more in-depth analysis, there are over 15 additional InvestingPro Tips available, including insights on the company's debt levels, cash flow capabilities, and valuation multiples.
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