Palo Alto Networks: Strong Performance but Limited Valuation Upside

Bank of America Securities analyst Tal Liani reiterated a Hold rating on Palo Alto Networks (PANW – Research Report) today and set a price target of $215.00.

Tal Liani has given his Hold rating due to a combination of factors related to Palo Alto Networks’ current financial performance and valuation. The company has shown strong execution in both its legacy and next-generation security segments, with product revenue growth surpassing market expectations. However, despite this growth, the stock’s valuation appears to be at a peak, with a forward P/E multiple of 53x, which limits the potential for further upside.
Additionally, while the company’s next-generation security annual recurring revenue (NGS ARR) is growing robustly, driven by platformization deals and other growth areas, the overall financials are maturing. The operating and free cash flow margins are expected to stabilize, and the substantial stock-based compensation expenses are not fully reflected in pro-forma estimates. As a result, Tal Liani maintains a Neutral stance, suggesting that the current stock price already reflects the company’s strong performance, leaving limited room for valuation growth.

According to TipRanks, Liani is a 5-star analyst with an average return of 10.1% and a 57.18% success rate. Liani covers the Technology sector, focusing on stocks such as CrowdStrike Holdings, Check Point, and Cisco Systems.