On Monday, Wells Fargo (NYSE:WFC) reiterated its Overweight rating on Palo Alto Networks (NASDAQ:PANW) stock, maintaining a price target of $385.00. The firm shared concerns about the potential for product revenue to fall short of expectations.
The current consensus estimate for product revenue stands at $388 million, which is consistent with the previous year's figures. However, Wells Fargo suggests the actual figure could be closer to $380 million, marking a 1% decline year-over-year.
Palo Alto Networks' competitors, Fortinet (NASDAQ:FTNT) and Check Point, have experienced year-over-year declines in product revenue, down 18% and 7% respectively. Reseller feedback indicates a shift in focus towards Secure Access Service Edge (SASE) and cloud solutions, rather than traditional firewall products.
In recent developments, Palo Alto Networks announced a strategic partnership with IBM (NYSE:IBM) on May 15, 2024. The deal involved Palo Alto Networks acquiring the Software-as-a-Service (SaaS) assets of IBM QRadar. The goal of this acquisition is to transition these customers to Palo Alto Networks' XSIAM platform.
Wells Fargo raised questions regarding the IBM transaction, particularly the undisclosed purchase price for the customer base and the confidence level of Palo Alto Networks' management in convincing these customers to migrate to XSIAM without considering competing vendors.
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