'Becoming a Cybersecurity Platform': Firms Raise Estimates and Price Target on Palo Alto Networks (PANW) Following Impressive Analyst Day

September 14, 2021 5:31 AM EDT
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Price: $480.58 -0.89%

Rating Summary:
    46 Buy, 8 Hold, 1 Sell

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    Up: 7 | Down: 14 | New: 24
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Shares of Palo Alto Networks (NYSE: PANW) closed 1.3% higher yesterday after the company delivered a comprehensive overview of its broad product portfolio during the Analyst Day event.

PANW said that the TAM is expanding to $110 billion by 2024 (CAGR of 14%), while revenue and billings are expected to reach $8 billion and $10 billings by FY24 showing a 23%/22% CAGR, respectively.

The company expects its operational margins to expand by 50-100bps annually by FY24 while FCF should improve by 100-150bps during this time frame.

Cowen analyst Shaul Eyal raised the price target to $550.00 per share from the prior $475.00 on the Outperform-rated stock.

“As enterprise customers move to consolidate dozens of products and simplify the management of their security solutions (not to mention cost reduction), we view PANW as well positioned to further upsell into new logos and existing customers,” Eyal wrote in a note sent to clients.

Mizuho’s Gregg Moskowitz reiterated a Buy rating and Top Pick, as well as raised the price target to $560.00 per share from $525.00 on a better-than-expected FY24 outlook.

“Yesterday, we virtually attended PANW's investor day event. The company provided a comprehensive overview of its broad product portfolio, and outlined why it is well positioned to help customers achieve a Zero Trust architecture. Most notably, PANW provided FY24 guidance for $10B in billings (22% CAGR) and $8B in revenue (23% CAGR), materially above Street forecasts of ~$9.2B and $7.4B, respectively. FCF guidance was also well above. We remain very constructive on the improving mix shift toward higher-growth recurring revenue, and reiterate our view that PANW easily possesses the strongest array of cloud assets among traditional network security vendors,” the analyst said in client note.

Stifel analyst Adam Borg raised the price target to $560.00 per share from the prior $490.00 as he believes PANW is establishing itself as a cybersecurity platform.

“Overall, we continue to believe Palo is well-positioned given its leading cybersecurity platform, ongoing digital transformation efforts globally, a strong cybersecurity spending environment, and a heightened threat landscape. Net/net, we believe Palo has a number of drivers to sustain at least low 20% top-line growth along with operating margin and free cash flow expansion and is well-positioned to be a natural consolidator of cybersecurity spend in coming years. At about 6.5x/19x our newly introduced CY23E EV/revenue and EV/FCF (below peers), we believe valuation remains attractive,” Borg said in a client note.

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