Palo Alto Networks shares got a rating upgrade, from a Raymond James analyst on what the latter perceives as significant underperformance.
The cybersecurity company’s shares were boosted to outperform from market perform by Raymond James analyst Adam Tindle . The analyst has a $400 price target on the shares.
Tindle said in a note that Palo Alto Networks "has underperformed significantly year to date, and we previously noted our concern that next gen [annual recurring revenue] guidance did not appear conservative." "We do still see this as a risk, but the stock has been penalized as relative valuation has compressed," Tindle said. "[And] our focus has now been turned to increased confidence that PANW can enter into a period of healthy growth and incremental profitability that are hallmarks of outperforming stocks in this space."
According to Tindle, Palo Alto experienced “a sustained period of healthy growth and operating leverage for the better part of prior CEO Mark McLaughlin's tenure." But the analyst also mentioned that significant acquisitions under current CEO Nikesh Arora have resulted in a period of depressed operating margin “while peer Fortinet has balanced organic growth with improving profitability and significantly outperformed during this period." The analyst added, "this creates an opportunity for Palo Alto as the previously noted Prisma platform is hitting an inflection, new [Chief Financial Officer] Dipak Golechha can be a catalyst for change in showing more operational improvement alongside this, and a revamped [investor-relations] effort should aid in communicating this story."