Stifel Raises Price Target On Palo Alto Networks

Stifel raised its price target on Palo Alto Networks Inc. PANW Tuesday from $110 to $120 and maintained a buy rating after the company beat Q1 estimates.

Analyst Gur Talpaz noted that “Palo Alto Networks reported F1Q15 results that came in ahead of expectations across all key metrics. While product revenue upside didn't match levels seen in F4Q14, strong growth in recurring subscriptions as well as support and maintenance revenue drove a sizable bump in deferred revenue, which, in turn, resulted in billings outperformance of nearly $20mn versus Street expectations.

“We continue to see Palo Alto gaining both mind and wallet-share within tier-1 customers and see the company benefiting from a firewall refresh cycle that has it consistently displacing legacy vendors such as Cisco and Juniper.”

Talpaz commented that “we are impressed with the company's results and would caution investors from focusing too much on product revenue, particularly given the company's performance last quarter.”

The analyst report concluded by forecasting “continued runway for both product revenue, driven by the growing adoption of the company's high-end datacenter appliances such as PA-7050, as well as recurring revenue, with growth in this arena coming from an improving attach rate and healthy maintenance renewal trends.”

The $120 target price was based on an 8.4x EV/FY16E sales multiple.

Palo Alto Networks Inc. recently traded at $119.86, up 5.83 percent.