Argus Upgrades Palo Alto To Buy, Sets $227 Target

• Palo Alto Networks Inc PANW shares having appreciated 49.33 percent year to date, reaching a high of $182.50 on November 24.
• Argus’ Joseph Bonner has upgraded the rating on the company to Buy, with a price target of $227.
• Apart from its superior technology, Bonner expects Palo Alto’s growth to be driven by international expansion, sales of additional products to existing customers and market share gains.

Analyst Joseph Bonner expressed optimism regarding “management’s balanced focus on revenue growth and increased profitability.”

“While Palo Alto trades at lofty multiples, the company is also growing substantially faster than most competitors, suggesting that it is both taking market share and generating more revenue from its existing client base,” Bonner stated.

The company reported robust results for F1Q16. Bonner believes that Palo Alto’s integrated security platform positions the company as the next generation leader in the enterprise security segment.

While the company current has single digit market share, Palo Alto’s billings and revenue growth are currently above 50 percent, which implies that the company has been gaining market share from its established peers.

In fact, Bonner mentioned that Palo Alto has been seeing the fastest growth in its history in the U.S., although the international workforce is also expected to develop over time.

“Palo Alto could also become an acquisition target for a larger tech player,” according to the Argus report.

The FY16 and FY17 EPS estimates have been raised from $1.64 to $1.72 and from $2.42 to $2.70, respectively, with a long term earning growth rate estimate of 50 percent.