Palo Alto Initiated At Jefferies, Called 'One Of A Few True Security Platforms'

“We view Palo Alto Networks Inc PANW as one of a few true security platforms, built on a unique singlepass architecture, answering a pressing customer desire to consolidate security functionality,” Jefferies’ John DiFucci said in a note, while initiating coverage of the company with a Hold rating and price target of $153.

Slowing Growth

The analyst mentioned that Palo Alto Networks has “astutely” leveraged this position through “impressive” go-to-market skills, leading to meaningful growth and market share gains.

However, new business growth has sharply slowed, and valuation appears rich when adjusted for stock based compensation.

“PANW has introduced a number of new products that both broaden its customer base and create new revenue opportunities. While some of these products are still in their infancy, they represent long-term potential,” DiFucci stated.

Estimates Too High?

The analyst also noted that meaningful new business growth of over 40 percent has driven Palo Alto Networks' network security market share from 3–10 percent over a span of four years.

However, with new business growth slowing, little or no growth is expected in FQ1:17. In fact, DiFucci believes that the fiscal 2018 and 2019 expectations could prove too high.

“Several security companies have reported slowing growth in recent periods; while we expect growth for the sector to remain meaningful, it is likely to moderate from recent years,” the analyst added.

At last check, shares of Palo Alto Networks were down 0.85 percent at $137.27.