Palo Alto Networks’ earnings report on Monday drew a slew of analyst upgrades and positive notes. The company reported quarterly results that beat Wall Street expectations on the top and bottom lines, gave strong quarterly and full guidance and announced that its board approved a 3-for-1 stock split that would take place in September. In addition, the company expanded its share repurchase program by $915 million to a total of $1 billion. Shares rose more than 8% in premarket trading on the news. “While most of our coverage universe is driving ratings lower on a CC basis, PANW is driving ratings higher,” BMO Capital Markets’ Keith Bachman wrote in a Monday note. The firm raised its price target to $675 from $650 and kept Palo Alto Networks as its top pick. Palo Alto Networks is down 9.5% year-to-date through Monday’s close. Billings strength Strong billings driven by large deals were one of the highlights of the company’s earnings release. Billings rose 44% in the fiscal fourth quarter, bringing in revenue of $1.6 billion — ahead of the company’s guidance for revenue of $1.53 billion to $1.56 billion. “Billing growth of 43.7% YoY was nearly double expectations for 25.4%, and the company continues to show good traction with next-generation security ARR up to 60.4% YoY, similar to the 65-70% growth + seen in the past. three quarters and attests to the successful execution of its strategy,” Bank of America analyst Tal Liani wrote in a note on Tuesday. The firm reiterated its buy rating and $650 price target for the company. Liani also noted that the company’s guidance for the full year 2023 and that management expects to achieve positive GAAP net income, another positive and previously a weak point. Liani has a price target of 650 dollars per share on the stock, representing a 28% increase from Monday’s close, and a buy rating.Positive EPS The company said it expects total revenue between $1.535 billion and $1.555 billion with net income diluted j o-GAAP per share between $2.03 and $2.06 in the first fiscal quarter of 2023. For the full year, the company said it expects total revenue to be between $6.85 billion and $6.90 billion with non-GAAP diluted net income per share of $9.40 to $9.50. Positive reporting of GAAP net income in the fiscal first quarter and full year 2023 should be welcomed by investors, Jefferies analyst Brent Thill wrote in a note on Tuesday. He also said he sees no overall macroeconomic concerns for the company and moved his price target to $650 from $600, while reiterating his buy rating. Achieving positive GAAP EPS will also put the company on track for inclusion in the S&P 500 by April 2023, Morgan Stanley’s Hamza Fodderwala wrote in a note on Tuesday. S&P 500 inclusion, $100 billion valuation Morgan Stanley sees Palo Alto Networks as the first cybersecurity company to reach a $100 billion valuation and expects it to reach the milestone in the next two years. “Against an increasingly uncertain macro backdrop, in which some security companies delivered underwhelming results, PANW continues to stand out,” Fodderwala wrote. Palo Alto Networks is also one of Morgan Stanley’s top picks. The firm has an overweight rating and price target of $823 on the stock, which implies a 62% upside from where the stock closed on Monday. — CNBC’s Michael Bloom contributed to this report.
