Palo Alto Networks Inc. (PANW) is a cybersecurity company that provides firewall appliances, software, and the Panorama platform - a security management solution to control, automate, and simplify global network security solutions. The company also provides threat prevention, malware, and virus threats, URL filtering, DNS security, mobile and laptop security, and data loss prevention services through a subscription-based model. 

Incorporated in 2005, the company caters to a wide range of customers in education, energy, healthcare, financial services, internet and media, and government organizations. It's also a previous Nancy Pelosi stock pick.

Valued at $100.8 billion by market cap, Palo Alto stock has lagged the broader market this year. The stock is up 8.9% YTD, and recently slid 3.7% in a single session after releasing its quarterly results. 

Palo Alto Stock Slides After Earnings 

The cybersecurity company posted its fiscal Q3 results after the close on May 20, with revenue up 15% YoY to $1.98 billion, beating estimates of $1.97 billion. Earnings also topped estimates of $1.25 per share, rising 20% YoY to $1.32 per share. 

Billings increased 3% in the quarter to $2.33 billion, in line with the projected $2.3-$2.35 billion. The company also reported a strong free cash flow number, with a yearly increase of 22.6%, and its 12-month trailing FCF margins were also very solid. 

Despite beating on the top and bottom line, the company’s stock fell more than 7% intraday after earnings, as investors reacted to disappointing guidance.

Specifically, management expects revenue in the band of $2.15-$2.17 billion in Q4, with earnings between $1.40 and $1.42 per share. Billings are anticipated between $3.43 and $3.48 billion for Q4 - and for the full year, Palo Alto lowered the top end of its expected billings forecast from $10.2 billion to $10.18 billion.

What Do Analysts Make Of PANW?

According to analysts, Palo Alto’s adjusted billings guidance might have caused the market to overreact. Evercore ISI analyst Peter Levine reiterated his “Outperform” rating on the stock after earnings, with a target of $385. 

Morgan Stanley (MS) analyst Hamza Fodderwala also urged investors to remain calm regarding the billings growth, noting that Palo Alto is outpacing its peers on this front. Fodderwala backed an “Overweight” rating on the stock with a price target of $360. 

Elsewhere, analysts at Stifel and Wolfe Research also backed their respective bullish ratings on PANW post-report, with Stifel's research team pointing out that "F4Q will be a more important quarter," both seasonally and as management shares its FY2025 guidance.

Overall, analysts have a consensus “Strong Buy” rating on PANW. Currently, 41 analysts are tracking the stock, and 28 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 11 have a “Hold” rating. 

The mean price target for PANW is $333.51, indicating an upside potential of 3.5% from current levels. The Street-high target of $420 is about 30% overhead.