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Palo Alto Networks today

PANV

Palo Alto Networks

$397.78 +4.89 (+1.24%)

(As of 12:15 pm ET)

52 week range

$260.09

▼

$408.53

P/E ratio

54.87

Target price

$404.62

Palo Alto Network NASDAQ:PANV The stock price is in a multi-year upward trend that will continue for many years to come due to its leadership position in the cybersecurity space. It is a leading global cybersecurity provider and its business is supported by the growing use of digital technologies by businesses and industries, exacerbated by the exponential growth of cyber threats. Latest data shows that the number of cybersecurity incidents will exceed 50% in 2024 and is expected to continue to rise thanks to artificial intelligence. As threats grow, so does the time and cost to mitigate them, making cybersecurity and Palo Alto vital to the global economy.

Platformization is driving a long-term trend in cybersecurity

Palo Alto’s fiscal first quarter results prove that the move to platformization was the right move. The company’s CEO says platformization is critical to cybersecurity outcomes, and enterprises have realized this. This represents a 13.8% year-over-year increase in Palo Alto’s quarterly revenue, driven by double-digit increases in NextGen Security’s ARR and RPO. The ARR of the company’s mission-critical offerings grew 40% year-over-year (YoY) to $4.5 billion, representing about 50% of expected annual revenue, with overall revenue growth accelerating sequentially from the prior quarter. Product sales grew 3.7% and subscriptions, including NextGen offerings, increased 16.1%.

Margin news is good. The company saw a projected decline in gross profit due to free and price incentives designed to boost NextGen sales, but it was less than expected. Gross margins declined just 80 basis points and were offset by improved operating results, including from platformization efforts. GAAP net income rose 76% and adjusted 13%, with adjusted earnings of $1.56, $0.08 better than MarketBeat’s consensus estimate, and up 13% YoY, compounded by favorable forecast.

The company raised its guidance for the second quarter and full year due to evolving trends. The company expects NextGen ARR and RPO to maintain strong double-digit growth rates in the second quarter and this year, setting an adjusted earnings per share target of $6.33, five cents above the consensus estimate. The important point is that analysts are impressed by this news, which drives the update cycle.

Early analyst changes tracked by MarketBeat include multiple price target increases and an update to reflect 2024 trends. The upgrade came from Rosenblatt, which raised the stock to Buy from Hold, in line with consensus, and raised its price target to $425. The $425 target would be another new all-time high for the stock price and a stepping stone to higher levels indicated by the revision trend. At the top end, the stock is priced at $450 over the next 12 months, 15% above its critical support target.

Palo Alto Networks delivers shareholder value through equity growth

Palo Alto Networks does not pay dividends or repurchase significant amounts of stock, but rather provides shareholder value in other ways by investing and increasing business value and shareholder value. Balance sheet highlights for the first quarter included increases in cash and assets and decreases in current and total liabilities. The end result is a 14.3% increase in share capital, on top of the 24% increase recorded last year. The capital is expected to continue to grow in 2025 and 2026 due to rising earnings and cash flow prospects.

The share price fell after the publication, indicating that the market was expecting good news. However, the market remains above the critical support level around $380 and is likely to confirm support at this level. In this scenario, the market will also confirm a continuation of the uptrend, as evidenced by a breakout to the early November highs. Otherwise, this market could fall to $360 or lower before regaining momentum and continuing its uptrend.

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