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A favorable entry point in Palo Alto Networks has emerged, and Wells Fargo thinks the stock will benefit from major secular trends in cybersecurity. The bank initiated the cybersecurity stock at an overweight rating and $200 price target, implying an upside of 33%. Shares of Palo Alto Networks have slipped 18% this year. They are also down a total of 18% over the past 12 months. PANW 1Y mountain PANW 1Y chart “We view recent stock dislocation as a favorable entry point for exposure to nearly every major secular trend in cybersecurity,” wrote analyst Michael Turrin. Turin said Palo Alto Networks is a beneficiary of cloud computing, quantum computing and artificial intelligence. “We see PANW advantaged by its large enterprise customer base, distribution advantages, unmatched platform breadth & willingness to invest ahead of adoption curves (via both R & D / M & A). While maybe not the ‘cleanest’ story, 10%+ share in a $300Bn+ market seems like a realistic LT outcome,” he said. Network security remains a major catalyst for Palo Alto, the analyst added. He said that core network security currently makes up between 60% to 65% of revenue, and thinks the company should be able to sustain above-market growth at low-teens rate through 2030. “Among firewall vendors, PANW was quickest to adapt to the evolving NetSec landscape (distributed networks/users), capturing #2 in [secure access service edge] market share and now, in our view, best-positioned to win on the hybrid-cloud value proposition,” Turrin wrote. The analyst noted that shares of Palo Alto are now trading below their historical averages and below their historical premium versus other cybersecurity and large-cap companies. “We believe Palo’s platform and AI positioning combined with a strong financial profile (mid-teens+ growth & ~40% FCF margins) warrant a sustained premium to the comp group,” he said.
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