Citi has maintained its Buy rating on Palo Alto Networks (NASDAQ: NASDAQ:PANW) and increased the price target to $395 from $385. The firm recognized the company's solid performance, noting that Palo Alto Networks delivered a balanced financial report, surpassing high expectations.
The growth in Next-Generation Security (NGS) Annual Recurring Revenue (ARR), which saw a 43% year-over-year increase, reaching over $4 billion, was particularly impressive to the firm.
The cybersecurity company's billings and revenue also showed robust low-double-digit year-over-year growth, which was seen as a positive sign by analysts. The performance capped off a year in which Palo Alto Networks made significant go-to-market strategy changes. Additionally, the company's operating margin (OPM) and earnings per share (EPS) exceeded forecasts, although free cash flow (FCF) results and guidance were only in line with expectations.
Despite discontinuing the billings guide, Palo Alto Networks provided pro-forma revenue guidance that aligned with predictions, projecting a 12% year-over-year increase. For fiscal year 2025, revenue expectations were initiated at a similar level, which Citi found satisfactory.
There was some caution expressed regarding the modest expected increase in operating margin and the path to accelerating Remaining Performance Obligations (RPO) towards mid-20s growth.
Citi highlighted the conservative setup for NGS ARR, a compelling narrative around Generation AI technology, evidence of successful platform development, and earnings growth as key factors supporting the investment thesis for Palo Alto Networks.
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