Palo Alto Networks (PANW) simply picked up one other vote of confidence from Wall Avenue, and it arrived at a busy second for the inventory.
Shares closed at $247.55 on Could 18, close to a recent all-time excessive reached days earlier.
For a inventory that fell roughly 20% over the prior 12 months, that swing issues to anybody holding it.
The brand new name provides traders one thing concrete to weigh earlier than the corporate opens its books.
Palo Alto Networks is the most important pure-play cybersecurity agency by market worth.SOPA Photographs / Getty Photographs
Morgan Stanley raises its PANW worth goal to $253 on firewall and AI safety demand
Morgan Stanley analysts Meta Marshall and Keith Weiss raised their worth goal on Palo Alto Networks to $253 from $223 on Could 20, retaining an Chubby ranking, TipRanks reviews.
That means about 2% upside from the Could 18 shut, modest by itself however notable given how far the inventory has already run.
The financial institution pointed to robust demand throughout firewall refreshes, Prisma SASE, Cortex XSIAM and AI safety because the drivers.
A firewall refresh is the cycle the place corporations exchange growing old community safety {hardware}, and that alternative wave is now feeding income.
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The agency based mostly the brand new goal on a greater 37x a number of of estimated 2027 free money stream per share, up from 32x, an indication it now thinks traders can pay extra for every greenback Palo Alto generates.
Why the timing of the Palo Alto Networks name factors straight at June 2 earnings
The improve shouldn’t be random. Palo Alto Networks reviews fiscal third-quarter outcomes on June 2 after the market closes, and analysts are positioning forward of it.
Morgan Stanley expects the corporate to beat consensus on remaining efficiency obligations, a measure of contracted future income that hints at demand the earnings assertion has not but recorded.
The financial institution sees RPO rising nearer to 33% 12 months over 12 months, above the midpoint of administration’s personal steering.
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It additionally expects product income to land properly above the roughly 25% progress administration guided to.
Two latest prints set the desk: Fortinet grew product income 41% in its first quarter and lifted full-year steering, per sec.gov, whereas Cisco beat on networking.
Such robust numbers from rivals usually sign that the entire firewall market is wholesome, which works in Palo Alto’s favor.
How the Idira id launch reshapes the Palo Alto Networks progress story
The larger structural change sits in id safety, the work of controlling who and what can entry an organization’s programs.
That job is getting tougher quick.
As AI brokers begin appearing on their very own inside corporations, the variety of issues that want permission to log in and transfer information is exploding, and every one is a goal.
Palo Alto is transferring to personal that downside. As introduced in a Palo Alto press launch, the corporate launched Idira on Could 12 as its next-generation id platform, constructed to handle entry for people, machines, and AI brokers.
The launch makes the corporate’s $25 billion CyberArk acquisition a built-in a part of the platform as an alternative of a separate, standalone product.
Morgan Stanley sees three causes Idira issues:
It provides a transparent reply for why id belongs inside a safety platform, since agentic AI makes privileged entry way more frequent.
It opens a cross-sell path into Palo Alto’s base of greater than 70,000 clients.
It lets current CyberArk clients add zero-trust and machine id instruments over time.
The thesis is that id turns into a fourth pillar alongside community, cloud, and safety operations, widening how a lot every buyer can spend.
What nonetheless has to go proper for the $253 PANW goal to carry
A better goal shouldn’t be a assure, and the setup carries actual threat.
The inventory trades at a premium valuation, with a ahead earnings a number of far above the market, so any progress wobble can hit the shares onerous.
Palo Alto fell greater than 5% after its final two earnings reviews regardless of beating estimates, a reminder {that a} robust quarter doesn’t at all times raise the inventory.
Morgan Stanley additionally flagged potential stress on {hardware} gross margins from rising reminiscence prices, although it famous {hardware} makes up a smaller share of Palo Alto’s income than it does for opponents.
For the bull case to work, a couple of issues have to land.
Listed here are 4 indicators to look at on June 2:
RPO progress at or above the 32% to 33% vary that administration guided to
Product income clearing the 25% progress bar, helped by early firewall ordering
Subsequent-Gen Safety ARR holding its roughly 56% progress tempo
Early indicators that clients are adopting Idira and CyberArk instruments
If administration reiterates its full-year guides, as Morgan Stanley expects, the durable-demand argument will get stronger.
How PANW stacks up towards the broader market and its friends
Context helps right here. Palo Alto carries a market worth close to $176 billion, making it the largest pure-play cybersecurity identify.
The inventory’s roughly 78% climb off its 52-week low of $139.57 has far outpaced the S&P 500 over the identical window, after touching a file excessive in mid-Could.
Nonetheless, Wall Avenue shouldn’t be unanimous on worth, even whereas broadly bullish.
Current targets vary extensively.
Here is the place analysts stand forward of earnings:
Oppenheimer set a Avenue-high $275 after the CyberArk Impression occasion, Barchart reviews
Truist moved to $275 from $200, and RBC Capital lifted its goal to $255
That unfold displays a debate over valuation, not the corporate’s progress.
The takeaway for Palo Alto Networks traders
Morgan Stanley’s transfer to $253 matches a wider sample of analysts elevating targets forward of the June 2 report, pushed by firewall demand, AI safety traction, and a cleaner id story following CyberArk.
The case rests on Palo Alto beating its RPO and product income guides whereas displaying early Idira adoption.
The danger is a stretched valuation that has punished the inventory even on excellent news.
Traders who already personal PANW have a transparent guidelines for earnings day, and people ready on the sidelines might wish to see the quarter earlier than paying close to file costs.
Both manner, the demand tendencies Morgan Stanley is betting on get examined in a matter of days.
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