By Wallace Witkowski, MarketWatch
MarketWatch photo illustration/Getty Images, Bloomberg
Palo Alto Networks Inc.’s stock surged to close at an all-time high Wednesday with nearly half of analysts hiking price targets after the cybersecurity company crushed it on their quarterly results late Tuesday and rolled out a new automated security product.
Palo Alto Networks /zigman2/quotes/207599953/composite PANW +1.85% shares closed up 8.2% at $254,89, after touching a record intraday high of $260.63, for their highest close ever, beating a previous high of $236.23 set on Sept. 12. In comparison, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +2.89% finished down less than 0.1%, the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +2.28% closed up less than 0.1%, and the ETFMG Prime Cyber Security ETF /zigman2/quotes/207892345/composite HACK +0.61% rose 1.3%.
Late Tuesday, Palo Alto Networks turned in a big beat to quarterly earnings and a solid outlook and announced a new $1 billion stock buyback plan. While analysts were united in praising Palo Alto Networks on the results, they also focused on the introduction of Cortex, which Palo Alto Networks hailed as “the industry’s only open and integrated, AI-based continuous security platform.”
The growing push for AI-enabled cybersecurity products is meant to address the ever-dwindling pool of security personnel who have to chase after a growing number of threats, and Palo Alto Networks has spent the last 12 months pulling together acquisitions totaling more than $1 billion of five companies.
BTIG analyst Joel Fishbein, who has a buy rating and raised his price target to $285 from $270, said announcements concerning Cortex and the company’s Traps 6.0 Traps endpoint protection product “are making us rethink the competitive dynamics in multiple subspaces.”
“Management’s decision to give Traps 6.0 away for free with Cortex XDR signals its commitment to touching more realms of customer data but also its acknowledgment that clever tactics are necessary to do so,” Fishbein wrote.
Jefferies analyst John DiFucci, who has a buy and upped his price target to $296 from $249, called Cortex a “product stretching further than a typical endpoint detection and response product” in that integrated network and cloud data.
DiFucci said Palo Alto Networks “believes that the long-term ‘endgame’ in the endpoint market is that buyers will gravitate toward the vendors with the most data, as those vendors will provide the most effective security.”
Stifel analyst Gur Talpaz, who has a buy rating, raised his price target to $280 from $240 and said the company’s vision is starting to come together, especially with Cortex.
“As we’ve previously noted, Palo Alto has essentially made a 180 by moving firmly away from a core focus on prevention to one centered around improved response and security outcomes for their customers,” Talpaz said.
JPMorgan Sterling Auty, who has an overweight rating and raised his price target to $293 from $287, hailed the “impressive” quarter and thought “this execution and level of results puts to rest any concerns investors were having around the management transition.” In addition to the acquisitions over the past 12 months, Palo Alto Networks not only has a new president in former Google exec Amit Singh, but also a new chairman and chief executive, Nikesh Arora.
Auty, however, took a more wait-and-see attitude toward the Cortex and Traps 6.0 bundling.
“We have watched Cisco /zigman2/quotes/209509471/composite CSCO +3.01% attempt similar bundles and not generate success so it will take time for results to show if this move is paying off,” Auty said.
Summit Insights Group analyst Srini Nandury, who held on to his hold rating but raised his price target to $225, said “we will be watching Palo Alto’s software evolution very closely.”
“In the near-term, the next two to three quarters, the company will likely beat consensus estimates and probably will guide up modestly, driven by the upgrade cycle within the install base,” Nandury said. “We will evaluate our Hold rating after we meet with our industry contacts at the RSA conference to evaluate the prospects for the newer products.”
The weeklong RSA Conference, one of cybersecurity’s largest trade shows, kicks off Monday in downtown San Francisco.
Of the 40 analysts who cover Palo Alto Networks, 32 have buy or overweight ratings, seven have hold ratings and one has a sell rating. After 19 analysts hiked price targets, the stock has an average target of $271.70, up from its average price target of $247.11 before the earnings report, according to FactSet data.
For the year, Palo Alto shares have surged more than 35%, while the S&P 500 has risen 11.4%, the Nasdaq has advanced 13.9%, and the ETFMG Prime Cyber Security ETF has gained 19.3%.