After being on the sidelines for more than 18 months on network security vendor Palo Alto Networks Inc PANW, Deutsche Bank has moved in.
The Analyst
Deutsche Bank analyst Karl Keirstead upgraded shares of Palo Alto from Hold to Buy, and upped his price target from $160 to $180.
Goldman Sachs recently downgraded shares citing valuation, while Evercore ISI upgraded shares on the pretext the company has room to flourish in multiple arenas.
Related Link: Fortinet's Underappreciated Growth Story
The Thesis
The last few quarters at Palo Alto have been relatively clean, with overall firewall demand stabilizing and field checks suggesting positivity, Keirstead said in a note.
Checks with reseller/channel partners pointed to a relatively strong January 2018 quarter, with few checks suggesting good results for November/December, the analyst added. Additionally, the analyst said most checks forecast stable growth or a modest acceleration in 2018, as against the worst-case-scenario of a material deceleration.
Deutsche Bank views the guidance for the second-half of 2018 to be conservative, with Street estimates seem biased up.
"There is a lot of bad news baked into the stock at a time when many investors are looking for "cheap" technology stocks benefiting from an improving IT spending outlook," Keirstead said.
On the other hand, the firm downgraded shares of rival Fortinet Inc FTNT from Buy to Hold, citing worse-than-expected channel checks.
Price Action
Palo Alto shares have added over 16 percent in the past year.
The stock was up 3.5 percent to $159.34. Meanwhile, shares of Fortinet retreated about 1 percent to $45.59.
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