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Palo Alto Networks Inc. shares are basking in the ultimate relief rally Monday after the company’s Friday night earnings scare proved a fakeout.
Shares of the cybersecurity company had sold off by 18% between when the company announced it would be reporting results on Friday night and when it actually delivered those results. While investors were fearing the worst given the strange timing, Palo Alto Networks’
PANW,
results and outlook ended up being fine.
Read: Palo Alto Networks CEO addresses Friday earnings experiment: ‘Lesson learnt’
The stock is ahead 15.7% in Monday morning action and on track for its largest single-day percentage gain in about two years as Wall Street unpacks the company’s new targets.
“Overall the call reinforced our view that Palo Alto remains in a great position to consolidate enterprise security spend and in turn, remains a great way to invest in security at the platform level with expanding margins,” RBC Capital Markets analyst Matthew Hedberg wrote in a note to clients.
He sees “upward bias” to Palo Alto Networks’ outlook for metrics like billing and free cash flow looking ahead to fiscal 2024 and fiscal 2026.
He rates the stock at outperform and lifted his price target to $281 from $250.
Wolfe Research’s Joshua Tilton commented that “the only real negative from the surprise [fourth-quarter] earnings event was indeed the Friday night timing.”
He wrote: “At the end of the day, the timing of the event sent investor sentiment to an all-time tactical low heading into the print, yet results were better than feared and there was no catastrophic news. Our thesis that [Palo Alto] is the best brand in the security market with the most relevant products to sell into a large base of [chief information security officers] remains unchanged, we see room for upside to current [fiscal 2026] targets, and we are glad we kept our season tickets.”
He noted that bears might pick at management’s commentary that more customers want deferred payment terms, but the company “accounted for this in the guide for [fiscal 2024 free cash flow], which at 37.5% was in line with consensus and ahead of what investors had lowered their expectations to heading into the print.”
He has an outperform rating and a $255 target price on the stock.
UBS analyst Roger Boyd, meanwhile, was more cautious.
“After weeks of consternation, the [fiscal fourth-quarter] earnings and analyst day went much better than many had feared, but we are remaining Neutral on shares with a view that new estimates leave limited room for expansion,” he wrote.
The forecasts for fiscal 2024 and 2026 “were better than expected but neither look that conservative, calling for zero deceleration on the top-line metrics,” he wrote, whereas the prior three-year guidance called for 5 percentage points of deceleration, “even as the hardware firewall business shrinks to less than 10% of revenue.”
Though he stayed on the sidelines, Boyd boosted his price target on Palo Alto Networks shares to $260 from $220.
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