Palo Alto Networks one of the best software stocks of 2022 after another quarter of beating and recovery
Shares of Palo Alto Networks Inc. rallied on Friday in thin air for a technology company — and especially an enterprise software company — in 2022, after another quarter of beat and rally and praise from Wall Street.
Thursday night, Palo Alto Networks PANW,
maintained momentum, signaling another pleasant quarter on Wall Street and saying that while macro factors were weighing on business spending, the company was not seeing a lack of demand and that it could try to get customers to commit to deals sooner.
With its shares up 8% on Friday, shares of the company ended the session down 9.8% year-to-date. In comparison, the ETFMG Prime Cyber Security ETF HACK,
is down 26.4% since the start of the year, the First Trust Nasdaq Cybersecurity ETF CIBR,
is down 23.5%, the S&P 500 SPX index,
is down 16.8% and the tech-heavy Nasdaq COMP composite index,
is down 28.8%.
Citi Research analyst Fatima Boolani, who has a buy rating, said in a Friday note that Palo Alto Networks “has easily removed all major barriers to growth and profitability.”
While it was another quarter of beating and rebounding, Boolani acknowledged the restraint in the “increase” part, which she said signaled “cautiousness over budget/review of big contracts “that the company” sees in pockets, and where Palo Alto Networks’ proactive rigor of transaction/offer pipeline coverage estimate of security risk.”
Jefferies analyst Joseph Gallo, who also has a buy rating, applauded the company’s annual recurring revenue, or ARR, growth of 67% and said sustainable booking has helped lengthen sales cycles. transaction. ARR is a metric often used by Software as a Service, or SaaS, companies to show the amount of revenue the company can expect based on subscriptions.
Gallo, however, said he was keeping tabs on billing growth, which slowed with just a 27% year-over-year gain, and a slowdown in large transaction growth, which was to its lowest since mid-2019.
Stifel analyst Adam Borg, who has a buy rating, said Palo Alto Networks’ report “ticks all the boxes.”
“Net/net, we continue to believe that Palo has a number of drivers to sustain at least 20% revenue growth and operating margin/free cash flow expansion in the years to come,” Borg said. “More generally, we continue to believe that Palo is well positioned to be a natural cybersecurity spend consolidator and that its growth/profitability characteristics provide some degree of defense in these uncertain times.”
Of the 41 analysts polled by FactSet, 37 have buy ratings and four have hold ratings. The stock has not carried a sell rating from an analyst polled by FactSet since January 2022. Of the analysts covering the stock, 10 raised and six lowered their price targets, giving an average of 217, $87, down from $219.21 previously, according to FactSet Data.
While Palo Alto Networks is not on the S&P 500, it is on the Nasdaq 100 NDX,
where he is the 32nd best performer of the year so far. But among tech companies, the only top performers are analog chipmakers like Texas Instruments Inc. TXN,
and Analog Devices Inc. ADI,
and video game publishers Activision Blizzard Inc. ATVI,
— which is just waiting for the Microsoft Corp. MSFT,
acquisition to close – and Electronic Arts Inc. EA,
Although not on the Nasdaq 100, the only top-performing stocks in all-important enterprise software are International Business Machines Corp. IBM,
which is up 10.5% year-to-date, and product management software company PTC Inc. PTC,
which is up 1.8% since the start of the year.