Tal Liani, an analyst from Bank of America Securities, reiterated the Hold rating on Palo Alto Networks (PANW – Research Report). The associated price target remains the same with $215.00.
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Tal Liani has given his Hold rating due to a combination of factors including strong quarterly performance and valuation concerns. Despite Palo Alto Networks reporting solid results for the second quarter of FY25 with revenue and margin exceeding expectations, the stock’s high forward P/E multiple of approximately 50x has been a key reason for maintaining a Neutral stance. The company’s ongoing platformization strategy and strong growth in both its legacy and next-generation segments underscore its solid market position. However, an earnings per share (EPS) figure slightly below consensus due to inventory write-offs and the ramp-up of new SaaS solutions also factored into the Hold rating.
Another crucial consideration was the sustainability of free cash flow (FCF) margins. Although management remains optimistic about achieving a 50% year-over-year FCF growth in the latter half of FY25, the variability in quarterly FCF margins and the increasing mix of deferred payment plans pose uncertainties. Despite these risks, Palo Alto Networks’ product revenue growth is showing signs of recovery, driven by demand for both appliances and software, with management anticipating continued strong trends. Thus, while the company demonstrates robust growth and strategic advancements, the valuation and financial sustainability aspects lead to a Hold recommendation.
Liani covers the Technology sector, focusing on stocks such as Palo Alto Networks, Cisco Systems, and Ciena. According to TipRanks, Liani has an average return of 11.1% and a 57.07% success rate on recommended stocks.