On Thursday, Oppenheimer maintained an Outperform rating on Palo Alto Networks (NASDAQ:PANW) stock and increased the shares target to $390 from $330.
The firm anticipates the cybersecurity company to meet its July-quarter fourth fiscal year 2024 (4QFY24) sales guidance of $2.16 billion, reflecting a 10.6% year-over-year growth. The consensus estimate for sales is closely aligned at $2.163 billion.
The company is also expected to achieve, or potentially exceed, its billings guidance of $3.455 billion. This outlook comes despite earlier challenges in the fiscal year, including a strategic shift to platformization and a weaker performance in the Federal vertical market.
Oppenheimer highlights Palo Alto Networks' early signs of success in adopting a platform-based approach, especially in the Secure Access Service Edge (SASE) and cloud security sectors, where it competes with companies like Fortinet (NASDAQ:FTNT) and Check Point, as well as smaller startups.
Palo Alto Networks is also poised to provide an update on the adoption of its platform approach, with an aim to reach 2,500 platformization instances, up from 900 in the previous quarter. Each customer can account for up to three platformizations.
Additionally, the firm expects the company's Next-Generation Security (NGS) Annual Recurring Revenue (ARR) to continue its solid growth, staying on track to surpass the fiscal year 2024 target of $4.075 billion, which would represent a 37.9% increase year over year.
In terms of profitability, Palo Alto Networks is anticipated to maintain a Free Cash Flow (FCF) margin between 35-40%. Oppenheimer expresses confidence in the company's management to achieve NGS ARR growth and meet the ambitious fiscal year 2030 NGS ARR goal of $15 billion, which would require a compound annual growth rate (CAGR) of 24%. The firm's revised price target of $390 is reflective of this positive outlook on the company's long-term market positioning and financial performance.
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