Investing.com — Palo Alto Networks reported strong first-quarter results, but initial market reactions to its conservative guidance may not fully capture the company’s positive trajectory, according to Wedbush analysts.
While revenue of $2.14 billion slightly beat the Street’s $2.12 billion estimate, and operating margins of 28.8% exceeded expectations, it “was overshadowed by its conservative guidance with Street expectations on its platformization strategy to reaccelerate RPO, ARR, and billings,” said Wedbush.
The firm emphasized that the company’s platformization strategy is gaining traction, as seen in a 6% increase in Next-Gen Security (NGS) ARR per platformized customer compared to FY24.
They explained that NGS ARR grew 40% year-over-year to $4.52 billion, surpassing the Street’s estimate of $4.37 billion. Additionally, 53% of NGS ARR now comes from platformized accounts, up 300 basis points from the same quarter last year, keeping Palo Alto on track to meet its $15 billion NGS ARR target by 2030.
Growth in the Secure Access Service Edge (SASE) market and increasing ARR from Cortex and XSIAM, which each hit $1 billion this quarter, are said to underscore Palo Alto’s strong positioning in the cybersecurity sector.
Wedbush also highlighted the company’s approved 2:1 stock split, set to take effect on December 16, aimed at improving share accessibility.
For FY25, Palo Alto raised its revenue guidance to $9.12-$9.17 billion, aligned with the Street’s $9.13 billion estimate, and increased EPS expectations to $6.26-$6.39, above consensus at $6.28.
The company anticipates robust AI-driven cybersecurity spending to sustain growth.
Wedbush remains bullish, maintaining an Outperform rating and a $400 price target on the stock.
“While we believe the stock negative initial reaction was overblown, we believe PANW’s efforts on platformization are just beginning to hit its stride as it generates a more stable pipeline of platformization deals with cloud penetration still acting as a major driver going forward,” wrote Wedbush. “PANW remains one of our favorite cyber security names to own over the next 12-18 months.”
