Bank of America has upgraded Palo Alto Networks from neutral to a buy rating.
Bank of America maintained its target price for $215 per share, which represents a 22% increase from the close on Monday at $176.17.
Shares rose after the call, with around 6% of gains in Tuesday’s pre-market.
Analyst Tal Liani highlighted Palo Alto’s “technological leadership” and its “product leadership” in the sector as key advantages in maintaining the company’s position.
Liani says that the platform strategy of his company is gaining momentum, and software has become a major contributor to growth.
The software industry now represents 56% of all product revenue, up from 44% just a year earlier, and is supported by over 1,400 platforms deals.
Results beat expectation
The company reported stronger-than-expected results for its fiscal fourth quarter, exceeding analyst estimates on both earnings and revenue.
The adjusted earnings per share came out at 95 cents, compared to the expected 88 cents, and revenue increased from $2.5 billion to $2.54 Billion.
The revenue grew 16% from $2.2 billion in the same period last year.
The net income dropped from $358 million to just $254 million or 36 cents a share. This compares with the previous year’s period of $358 million or 51 cents a share.
StreetAccount had estimated a profit per share of between 85 and 88 cents for the first fiscal quarter. Palo Alto is expecting a higher adjusted earning.
The full-year guidance for revenue was between $10.48 and $10.53 Billion, while adjusted earnings were projected to be $3.75 – $3.85 Per Share.
Wall Street was surprised by the positive outlook for both companies.
Analysts had estimated that the company would report remaining purchases obligations between $15,07 billion and $15.5billion.
Major Acquisition and Leadership Transition
Palo Alto announced its financial results along with the acquisition of Israeli Identity Security provider CyberArk for $25 billion, making it their largest deal to date.
This acquisition is the most ambitious in 24 purchases made by Chief Executive Nikesh Arora since he took over as CEO in 2018.
Arora said to CNBC that he was looking for a great product and a team who could execute it. We then let them manage the project. It’s a new challenge but I am confident our team will be up to it.
In the quarter, Nir Zuk retired from his position as Chief Technology Officer and founder.
Zuk will be replaced by Lee Klarich as Palo Alto’s CTO. He also joins the board of directors.
Palo Alto’s shares are down more than 3 percent in 2025 despite these developments. This is due to investor caution following recent announcements of acquisitions.
As new information becomes available, this post Palo Alto stocks jump 6% on premarket following Bank of America’s upgrade could be updated.
