Bank of America advised buying Palo Alto stock. What is Wall Street impressed with?

Bank of America upgraded its rating on shares of cybersecurity solutions provider Palo Alto Networks and now advises to buy them. The bank's recommendation changed after the company's report: the bank noted that its long-term prospects are becoming more and more encouraging and may become a catalyst for growth of the stock. And the purchase of the Israeli developer of solutions in the field of information security CyberArk will further strengthen the position of Palo Alto, analysts believe.

On August 19, Bank of America analyst Tim Liani upgraded Palo Alto from Neutral to Buy (Buy rating) and reiterated a target price of $215 per share, up 22% from the closing price on Monday, August 18.

According to Liani, Palo Alto's free cash flow will "go to the next level" and its "technology and product leadership" should help the company establish itself as a cybersecurity leader in the marketplace for the long term.

"Overall, the company's strategy seems to be bearing fruit, with 1,400 contracts already signed for platform solutions and software becoming a major growth driver - it now accounts for 56% of product revenue versus 44% a year earlier," the analyst said in a note quoted by CNBC.

Palo Alto shares were up 7.3% to $189 at one point in Tuesday trading. But then the securities slowed down to about 3.2%.

Palo Alto's strong results last quarter and its outlook reflect the effectiveness of its strategy to move all solutions onto one platform, which is particularly relevant in the age of artificial intelligence, according to Wedbush Securities analyst Dan Ives. He reiterated an Outperform rating and a target price of $225 per share for Palo Alto.

"We continue to believe that platformization is the right direction for Palo Alto. Cybersecurity is one of the main beneficiaries of the artificial intelligence revolution, and it is Palo Alto that can take the lead in the battle for market share. A strong quarter and optimistic outlook is an important step for CEO Nikesh Arora and his team," Ives wrote in a note cited by Seeking Alpha.

Wells Fargo analyst Andrew Nowinski reiterated an Overweight rating and a $235 target price after the report. He was positive on the possible $25 billion purchase of Israeli information security solutions developer CyberArk: Palo Alto announced its intention to pursue such a deal last week. "The company remains well positioned in the AI space. Once the CyberArk deal closes, it will have the most comprehensive platform in the industry," Seeking Alpha quoted Nowinski as saying.

Palo Alto's new products - cloud-based security platform Cortex Cloud and AI application protection platform Prisma AIRS - as well as its planned takeover of CyberArk strengthen the company's position in cybersecurity, according to Reuters.

"The company benefits from both new spending on AI and budget reallocation - from services to product solutions enabled by automation," Morningstar analyst Malik Ahmed Khan said in an interview with the agency. - We believe the acquisition of CyberArk Software will give Palo Alto access to a broader customer base - to cross-promote identity solutions to both existing CyberArk customers and Palo Alto's own customers."

According to MarketWatch, of the 58 analysts tracking shares of the cybersecurity solutions provider, 43 of them recommend buying the stock (Buy and Overweight), 13 advise holding it in a portfolio (Hold), and two suggest selling it (Sell). The Wall Street consensus price target of $176.17 per share of Palo Alto stock is in line with Monday's closing price.

On Monday, August 18, the cybersecurity solutions provider released results for the fourth quarter of fiscal year 2025 ended July 31.

Revenue rose 16% year-over-year to $2.54 billion, with adjusted EPS of $0.95, while analysts polled by LSEG expected $0.88, Reuters writes.

Palo Alto's revenue outlook for the first quarter of fiscal 2026 (going on now) was $2.45 billion to $2.47 billion - just above Wall Street's average expectation of $2.43 billion. Adjusted EPS guidance was also slightly better than forecast: $0.88 to $0.9 versus the consensus $0.85.

This article was AI-translated and verified by a human editor