On Tuesday, Evercore ISI maintained its Outperform rating on Palo Alto Networks (NASDAQ:PANW) but significantly reduced the price target from $455 to $230. The adjustment reflects the recent 2-for-1 forward stock split executed by the cybersecurity company on December 16th.
According to InvestingPro data, PANW currently trades at a P/E ratio of 43.2x, with 24 analysts recently revising their earnings expectations upward. The company maintains a "GREAT" financial health score, suggesting strong fundamental positioning.
The firm's analyst noted that the valuation methodology remains consistent, applying a 36x free cash flow (FCF) multiple to determine the price target. The reduction in the target price is solely attributable to the updated share count following the stock split, without any alterations to the financial projections or company outlook. With a market capitalization of $120 billion and revenue growth of 15% in the last twelve months, InvestingPro analysis reveals 14 additional key insights about PANW's valuation and growth prospects available to subscribers.
Evercore ISI's updated model for Palo Alto Networks aims to account for the change in the number of shares outstanding, which has doubled due to the stock split. The analyst emphasized that apart from the share count adjustment, all other financial assumptions remain unaltered.
This modification in the price target is a direct result of the stock split, which is a corporate action where a company increases the number of its outstanding shares to boost the stock's liquidity. Although the split does not affect the company's market capitalization, it does require analysts to update their models to reflect the increased share count.
The analyst's statement clarified the reasons behind the new price target: "We are updating our PANW model to reflect the 2-for-1 forward stock split that occurred on December 16th. Our valuation remains unchanged as we are sticking with our 36x FCF multiple. Our P/T adjusted for the 2-for-1 stock split goes from $455 to $230. We made no changes to any of our financial assumptions and or outlook expect for the update/adjust to our share count." For a comprehensive analysis of PANW's valuation metrics and future growth potential, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks with expert insights and actionable intelligence.
In other recent news, cybersecurity firm Palo Alto Networks has achieved Federal Risk and Authorization Management Program (FedRAMP) High Authorization for its suite of AI-powered cybersecurity solutions. This authorization allows federal agencies to utilize the company's solutions for highly sensitive, unclassified data in cloud computing environments. The company's recent financial performance includes a 15% revenue growth over the last twelve months and a 14% increase in total revenue, reaching $2.14 billion. However, calculated billings saw a year-over-year decrease of 14%.
In addition to these developments, Palo Alto Networks board member Dr. Helene D. Gayle resigned due to personal reasons. This change in the board composition was not due to any disagreements between Dr. Gayle and the company. Meanwhile, several analyst firms have adjusted their ratings and price targets for Palo Alto Networks. For example, Stifel maintained its Buy rating but reduced its price target to $225, and BMO Capital Markets kept its Outperform rating and raised its price target to $425.
Furthermore, Palo Alto Networks has made significant strides with its platformization strategy, including the acquisition of QRadar SaaS, which added $74 million to Next-Generation Security Annual Recurring Revenue (ARR), and the launch of the Prisma Access Browser, which gained over 115 new customers.
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