Investing.com -- Palo Alto Networks stock dropped 4.2% in morning trading Friday after Bernstein analyst Peter Weed downgraded the cybersecurity company from Outperform to Market Perform on Thursday evening. The analyst said a broad rally across the sector had pushed valuations to or beyond fair value.

Bernstein raised its price target for the stock to $351 from $253, but the new target remains below the stock's recent trading level, indicating limited near-term upside according to the firm.

The downgrade was part of a broader sector reassessment. Okta and SentinelOne received the same rating cut on the same day. Bernstein's note said the structural AI-driven demand story for cybersecurity remains intact, with industry data pointing to substantial growth in AI-related security spending. The firm said that after gains of roughly 100% since early 2026, the stocks had largely priced in that favorable outlook.

A company director sold shares at approximately $377 each in the days before Friday's session. The disclosure contributed to the stock opening lower.