BMO Capital analyst Keith Bachman reiterated an Outperform rating and $285.00 price target on Palo Alto Networks (NYSE: PANW) and believes the company will report a solid Q with upside and conservative guidance. Upside should come from product revenue but he would prefer it to be more balanced between subscriptions.

The analyst stated "we think Q3 guidance looks conservative, with upside tension. Q3 guidance implies slightly lower-than-seasonal trends with management guiding revenue to decline by ~1% q/q vs. average growth of ~3% q/q over the past two years. Moreover, assuming services revenue growth of 2-3% q/q, consistent with seasonal patterns, then Q3 revenue guidance implies that products decline by ~7% q/q, compared to 6.5% q/q growth in the year-ago period and average declines of ~3% q/q in the prior two years". "We think PANW’s FCF multiple is reasonable relative to our growth forecast".

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Shares of Palo Alto Networks closed at $216.26 yesterday.