Palo Alto Networks (PANW.US) posted strong performance but its stock price declined; Wall Street calls it a “buy the dip opportunity”

According to Zhicheng Finance APP, although cybersecurity company Palo Alto Networks (PANW.US) delivered earnings and guidance above expectations, the company’s stock price still fell 2.5% in pre-market trading on Wednesday. Nevertheless, the company's performance was praised by Wall Street.

Palo Alto Networks released its fourth quarter and full year financial reports for fiscal 2026. Fourth quarter revenue reached $3.41 billion, a year-on-year increase of 34.3%, exceeding the market expectation of $3.35 billion by about $60 million. Adjusted earnings per share were $1.02, also higher than the expected $0.98. Full fiscal year 2026 revenue reached $11.5 billion, a year-on-year increase of 24%.

Jefferies analyst Joseph Gallo maintained a “Buy” rating on Palo Alto Networks with a target price of $450. Gallo described Palo Alto’s results as “very outstanding” and stated that, driven by artificial intelligence, he believes there is even more upside to the company’s “impressive” guidance for fiscal 2027.

“This is PANW’s most outstanding financial report in recent quarters, with growth in the Mythos business in the fourth quarter, though management also noted it is still in the early stages,” Gallo wrote in a client report. “The revenue guidance for fiscal 2027 is $14.15 billion (up 23% year-on-year), higher than expected (21%), and more importantly, considering the slowdown of growth in core cybersecurity/AI business and the recent strong order growth, the stock still has significant upside.”

Bank of America analyst Tal Liani reiterated his “Buy” rating on Palo Alto with a $420 target price, stating that any weakness in the stock is a buying opportunity.

“Although NGS annual recurring revenue exceeded market expectations by about 3%, we believe overly high investor expectations may have led them to expect even stronger results to drive the stock higher,” Liani wrote in a client note. “In this context, we think the muted after-hours market reaction reflects the challenging market environment more than any deterioration in quarterly execution.”

BNP Paribas analyst Andrew DeGasperi pointed out that the company’s adjusted free cash flow margin for fiscal 2027 was only 37.5% to 38%, lower than buy-side expectations, which may be the main reason for post-market stock volatility. However, DeGasperi also noted this was one of Palo Alto Networks’ “most outstanding quarters in recent years,” but warned that the company expects 61% of NGS ARR to be recognized in the second half of the year, and this “back-end concentration” could create short-term expectation fluctuations in the first half.

JPMorgan analyst Brian Essex set a price target of $384 for Palo Alto Networks. Essex noted that the company, led by Nikesh Arora, is achieving “solid execution” and is benefiting from accelerated positive developments brought by artificial intelligence. In an interview, Arora stated that nearly $1 trillion of cybersecurity infrastructure is still not prepared for the rise of artificial intelligence.

“After the Mythos incident, CIOs have an increasingly urgent need to improve security posture. We continue to believe the company’s platform advantage puts it in a favorable position at the right time to help CIOs adapt to the AI-driven transformation in cybersecurity,” Essex wrote in a client note. “Besides providing a platform to speed up clients’ average response time, the company also noted that clients are looking to address technical debt by consolidating traditional IT solutions on their platform. We are encouraged by this quarter’s accelerated growth and positive momentum, and maintain our ‘Overweight’ rating on the company while adjusting our expectations to reflect this period’s results and outlook.”