4 Reasons Why Susquehanna Upgraded Palo Alto Networks

Security platform Palo Alto Networks Inc (NYSE:PANW) has won an upgrade ahead of its fiscal second-quarter report after the close Feb. 26.

Susquehanna Financial Group analyst Anne Meisner upgraded Palo Alto from Neutral to Positive and increased the price target from $150 to $195.

The upgrade was based on the following factors, Meisner said in a Wednesday note:

Total revenue at Palo Alto is poised to show more stable growth, with an increasing proportion of revenue expected to come from recurring subscriptions. The analyst said she expects total revenue growth in the high-teens range beyond 2018.
Palo Alto is benefiting from a strong refresh cycle and increasing traction in several unattached subscriptions, such as the GlobalProtect Cloud, Traps and virtual appliances, the analyst said, citing industry feedback.
The setup for the company appears to be reasonably accommodating for both the second quarter and the second half of 2018, Meisner said. A solid quarter, though discounted by the stock, could offer evidence of continued stabilization in execution and in turn provide support for the stock at current levels, the analyst said.
Susquehanna said the relative valuation has become attractive after a long period of underperformance.

The new price target is based on 8x Palo Alto's newly introduced calendar 2019 recurring revenue estimate.

Palo Alto shares are up over 7 percent over the past year. The stock was up 1.77 percent at $165.80 at the time of publication.

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