Palo Alto Well-Positioned To Drive Strong Growth, Profitability And FCF, Analysts Say

Barclays analyst Saket Kalia maintained Palo Alto Networks Inc PANW with an Overweight and raised the price target from $200 to $215.

The biggest surprise from PANW 1Q was NGS ARR accelerating to 67% growth Y/Y and the FY23 FCF margin guide going up 100 bps. 

There was more macro caution than last quarter, so he thinks beats get smaller. But the bull case on NGS growth remains, and profitability is better.

Mizuho analyst Gregg Moskowitz reiterated a Buy with a $220 price target. PANW reported a good F1Q under more challenging circumstances. 

Total billings growth of 27% Y/Y comfortably surpassed the Street's 23% forecast, and next-gen security ARR growth surprisingly accelerated. 

PANW also reported stronger-than-expected operating margins and cash flow, and management aims to drive incremental operating leverage. F2Q billings and revenue guidance were roughly in line, and FY23 was slightly raised. 

More broadly, he remains very constructive on PANW's improving mix shift toward higher-growth recurring revenue. He also reiterates his view that PANW possesses the most robust array of cloud assets among traditional network security vendors.

RBC analyst Matthew Hedberg maintained Outperform and $233 price target. Palo Alto delivered another strong quarter, highlighted by 27% billings growth versus 22% consensus and +67% NGS ARR growth which accelerated Q/Q and crossed $2 billion in scale. 

Despite some macro pressure, management executed well, including increased customer engagement early in the quarter and front-load hiring. 

As such, FY23 guidance moved slightly higher. PANW remains one of his top ideas.

Wells Fargo analyst Andrew Nowinski reaffirmed Overweight with a $250 price target. Palo Alto reported another strong quarter, highlighted by 67% Y/Y growth in next-gen ARR. 

The results stand out relative to all the other vendors reported so far, given the strong growth, profitability, and FCF against a problematic macro backdrop. 

Prisma SASE demand was a crucial driver in the quarter, and management noted these deals are typically ~3x more significant than a firewall deal. 

They also noted that they have several 8-figure SASE deals in the pipeline. Finally, they announced a 9-figure deal (5 years) with the DoD for the Xpanse solution, which also has a strong pipeline. 

Nowinski believes Palo Alto is well-positioned to continue driving strong growth, profitability, and FCF. 

Credit Suisse analyst Phil Winslow reiterated Outperform and cut the price target from $228 to $225.

Price Action: PANW shares traded higher by 6.46% at $166.88 on the last check Friday.