On Tuesday, DA Davidson reaffirmed its confidence in Palo Alto Networks (NASDAQ:PANW), elevating the cybersecurity company's price target from $380 to $415, while maintaining a Buy rating on the stock. The firm's analyst cited the company's fourth fiscal quarter results, which surpassed expectations across numerous key performance indicators, including Billings.
The analyst noted that Palo Alto Networks delivered a robust Net New Next-Generation Security (NGS) Annual Recurring Revenue (ARR) of $430 million, marking a 13% year-over-year increase and significantly outperforming the consensus estimate of approximately $280 million. Furthermore, the company's NGS ARR now stands at $4.22 billion, a 43% year-over-year growth, accounting for 59% of the estimated Subscription and Support Revenue for the upcoming quarter, up from 55% in the previous quarter.
The forecast for fiscal year 2025 was described as meeting or slightly exceeding expectations. Management's decision to guide towards Total Remaining Performance Obligations (RPOs) rather than Billings was praised by the analyst, who expressed a preference for Contractual Remaining Performance Obligations (CRPOs) as an even better measure.
Additionally, the analyst suggested that Palo Alto Networks' guidance for a 29-30% year-over-year growth in NGS ARR for fiscal year 2025 seems conservative. This projection implies a Net New ARR (NNARR) change of minus 3% to 0% year-over-year, which contrasts with the 19% growth seen in fiscal year 2024.
The report also briefly mentioned that an outage experienced by competitor CrowdStrike (NASDAQ:CRWD) may have had a positive impact on Palo Alto Networks. The upgrade of the price target reflects the analyst's continued endorsement of the stock with a Buy rating.
In other recent news, Palo Alto Networks has been making significant strides in the cybersecurity sector. The company's fourth-quarter results for fiscal year 2024 revealed a 10.8% year-over-year increase in billings, surpassing both BTIG's and Wall Street's predictions. Its Next-Generation Security (NGS) Annual Recurring Revenue (ARR) also saw a significant 42.8% year-over-year increase. BTIG has subsequently raised its price target for Palo Alto Networks to $395, maintaining a Buy rating on the stock.
Palo Alto Networks has also projected robust fiscal year 2025 revenue and profit, surpassing Wall Street expectations. The company's fiscal 2025 revenue is expected to reach between $9.10 billion and $9.15 billion. This positive outlook has led to several analysts, including those from Rosenblatt Securities, Baird, Evercore ISI, and Citi, raising their price targets for the company.
In a recent development, Palo Alto Networks has expanded its partnership with SLB to enhance cybersecurity measures for the energy sector. This collaboration will leverage SLB's expertise in cloud and edge technologies and Palo Alto Networks' cybersecurity solutions.
The initiative is set to provide SLB with advanced security infrastructure and contribute to the development of new solutions to combat the increasing cyber risks associated with the industry's shift towards digital and AI-driven technologies.
InvestingPro Insights
Palo Alto Networks (NASDAQ:PANW) has been highlighted by DA Davidson for its impressive fiscal performance and robust growth in its Next-Generation Security (NGS) Annual Recurring Revenue (ARR). In alignment with this positive outlook, InvestingPro Tips indicate that Palo Alto Networks is expected to see net income growth this year and remains a prominent player in the Software industry. These insights underscore the company's strong position in the market and potential for continued financial success.
From a valuation perspective, Palo Alto Networks is trading at a high earnings multiple, with a P/E ratio of 43.94, signaling that investors may expect high growth rates in the future. The company's market cap stands at a substantial $111.18 billion, reflecting its significant presence in the cybersecurity sector. Additionally, Palo Alto Networks boasts a robust revenue growth of 20.05% over the last twelve months as of Q3 2024, further reinforcing the analyst's optimistic view on the company's financial trajectory.
For investors seeking a deeper analysis, there are 15 additional InvestingPro Tips available, providing a comprehensive understanding of Palo Alto Networks' financial health and market position. For more detailed insights, you can explore these tips on InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.