A wall held Palo Alto Networks (NASDAQ: PANW) stock. Palo Alto Networks fell 28.5% after earnings last month. Can the king's horses and men bid Palo Alto Networks shares back up to $350?
Today, investors must decide as equity analyst Redburn Atlantic lifts Palo Alto stock's price target to $350. That was the stock price until Palo Alto published fiscal Q2 2024 earnings on Feb. 21 and warned of cybersecurity slowdown.
Should I buy Palo Alto stock? Sales rose 19% and earnings soared 19-fold in Q2 2024. However, Palo Alto CEO Nikesh Arora startled investors with a new "platformization and consolidation" strategy that could restrict sales growth to 13% in Q3 and billings growth to 2%.
Redburn analyst Nina Marques isn't worried. Palo Alto's "platformization" may restrict growth in the short run by offering discounts for bundled services.
As Palo Alto uses AI to improve product cybersecurity, she envisions platformization yielding "massive returns" in the long run. Marques calls Palo Alto an AI stock.
How might this work in practice? I'd like Palo Alto to create $5 billion in free cash flow before 2027 to support its $92 billion market cap and 18.5% long-term growth rate.
Most analysts don't see that happening. At $281, Palo Alto is likely expensive because it is forecast to earn only $3.1 billion in free cash flow this year. It's not worth $350 a share until the company expands faster than analysts expect.
In conclusion, Redburn is mistaken. Despite its quality, Palo Alto stock won't reach $350 soon.
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