Wall Street analysts are showing two cybersecurity stocks some love ahead of their quarterly results. The news Evercore ISI this week raised its price target on Palo Alto Networks to $455 from $395, implying a nearly 18% upside from Monday’s close. The analysts said that recent channel commentary not only “sounded notably more positive” ahead of the quarter, but also had a “strong emphasis on solid execution across the board.” They maintained their buy-equivalent rating on shares. On Tuesday, Jefferies went to $450 a share from $400, with analysts expecting healthy results. In addition, Truist on Monday raised its price target on Palo Alto to $425 from $387 a share. The firm’s analysts argued that Palo Alto’s recent shift to “platformization” — a sales strategy that bundles its products and services together — looks promising. “Larger platformization deals are leading to bigger long-term commitments,” Truist said, citing conversations with Palo Alto customers and partners. Truist also said there could be a sell-off on results if investors see a deceleration in billing — despite management’s continued emphasis on remaining performance obligation (RPO) as a better gauge of success. Shares are down slightly Tuesday amid a broader market decline on rising geopolitical tensions from the Ukraine-Russia war. Palo Alto will post quarterly results Wednesday after the market closes. PANW YTD mountain Palo Alto Networks (PANW) year-to-date performance Big picture Palo Alto Networks had a rocky start to 2024. In February, management cut its full-year guidance for revenue and billings as it pivoted to the platformization strategy, which required the company to give more discounts on its offerings. But CEO Nikesh Arora said the move would lead to more revenue growth in the long term as the industry consolidates. As a result, the stock had its single worst session since 2012 following the release. Palo Alto shares seesawed for several months, but ultimately recovered, and have even outperformed the broader market year to date — up 31% versus the S & P 500 ‘s 23% advance. That doesn’t mean Palo Alto is in the clear this quarter. Wall Street will pore over the earnings results for signs that the platformization bet is paying off. Bottom line Palo Alto’s sales strategy is a great way to capitalize on a consolidating industry, and it should help the company grab more share from its peers. We saw the stock’s decline earlier this year as short-term pain for long-term gains. Still, we’re eager to hear what management has to say about the return on investment (ROI) for these sales incentives during the earnings call. The Club is also looking for commentary on the state of cybersecurity spending, which can give investors another read into demand for Palo Alto’s offerings. So far, the industry has been a great space to invest in as the risks of hacks and virtual breaches continue to increase. “This still remains the hottest sector in the entire economy,”…
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