Wedbush: AI's Impact on Software Industry Limited
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy PANW?
Source: seekingalpha
- Investor Concerns: Wedbush Securities analysts highlight that investor fears regarding AI models from OpenAI and Anthropic displacing enterprise software and cybersecurity providers stem from a 'fear of the unknown,' with capital expenditures nearing $700 billion this year yet lacking proof of tech monetization.
- Budget Cutting Risks: Analysts warn that IT budgets could potentially cut 70% by opting for cheaper AI tools, although this theory appears sound on paper, the complexity of modern enterprises renders such a goal nearly impossible to achieve in practice.
- Cybersecurity Industry Landscape: The U.S. cybersecurity sector boasts nearly 9,000 companies, thriving despite numerous mergers and acquisitions, with a projected 33% increase in information security analyst jobs from 2023 to 2033, indicating robust industry growth.
- Palo Alto's Market Positioning: Palo Alto Networks is strategically positioned at the forefront of cybersecurity, expected to monetize the AI cybersecurity total addressable market through its CyberArk deal over the next 12 to 18 months, even as investors remain skeptical about its long-term AI vision.
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Analyst Views on PANW
Wall Street analysts forecast PANW stock price to rise
34 Analyst Rating
28 Buy
5 Hold
1 Sell
Strong Buy
Current: 152.350
Low
157.00
Averages
232.49
High
265.00
Current: 152.350
Low
157.00
Averages
232.49
High
265.00
About PANW
Palo Alto Networks, Inc. provides comprehensive artificial intelligence (AI)-powered security solutions across network, cloud, security operations and AI. The Company focuses on four areas: Network Security, Cloud Security, Security Operations and Threat Intelligence and Advisory Services (Unit 42). Its network security platform comprises ML-powered firewalls, AI Runtime Security, and a Secure Access Service Edge (SASE) framework, which includes Prisma Access, Prisma SD-WAN, and Prisma Access Browser to secure remote workforces and branch offices. Its Cloud security is delivered via Prisma Cloud, a Code to Cloud platform that protects applications, data, GenAI environments, and the cloud-native stack throughout the development lifecycle. Its Unit 42 division provides intelligence-led consulting, incident response, managed detection and response, and threat hunting services. Its Prisma AIRS is an AI security platform which secures applications, agents, models and data.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Palo Alto Releases Earnings Amid Changing Cyber Threat Environment
- Earnings Report: Palo Alto Networks is set to release its second-quarter earnings report on Tuesday afternoon.
- AI Disruption: The company is also focusing on the impact of artificial intelligence on various industries, indicating a strategic shift in their approach.
See More
Palo Alto Networks to Release Q2 Earnings Results
- Earnings Expectations: Palo Alto Networks is set to release its Q2 earnings report after the market close on February 17, with analysts forecasting earnings of $0.94 per share, an increase from $0.81 per share in the same quarter last year, indicating ongoing improvement in profitability.
- Revenue Growth: The company is expected to report quarterly revenue of $2.58 billion, up 14.2% from $2.26 billion a year earlier, reflecting strong demand and an increase in market share within the cybersecurity sector.
- Acquisition Completion: On February 11, Palo Alto Networks announced the completion of its acquisition of CyberArk for $45 per share in cash plus 2.2005 shares of Palo Alto stock, which will enhance its product offerings and competitive positioning in the market.
- Stock Performance: Following the latest news, Palo Alto's stock rose by 2.6% to close at $166.95, indicating positive market sentiment regarding the company's growth potential moving forward.
See More
Wedbush: AI's Impact on Software Industry Limited
- Investor Concerns: Wedbush Securities analysts highlight that investor fears regarding AI models from OpenAI and Anthropic displacing enterprise software and cybersecurity providers stem from a 'fear of the unknown,' with capital expenditures nearing $700 billion this year yet lacking proof of tech monetization.
- Budget Cutting Risks: Analysts warn that IT budgets could potentially cut 70% by opting for cheaper AI tools, although this theory appears sound on paper, the complexity of modern enterprises renders such a goal nearly impossible to achieve in practice.
- Cybersecurity Industry Landscape: The U.S. cybersecurity sector boasts nearly 9,000 companies, thriving despite numerous mergers and acquisitions, with a projected 33% increase in information security analyst jobs from 2023 to 2033, indicating robust industry growth.
- Palo Alto's Market Positioning: Palo Alto Networks is strategically positioned at the forefront of cybersecurity, expected to monetize the AI cybersecurity total addressable market through its CyberArk deal over the next 12 to 18 months, even as investors remain skeptical about its long-term AI vision.
See More
Palo Alto Networks' Decline Could Be a Blessing if This Condition Remains True
Earnings Guidance Update: Palo Alto Networks' recent earnings guidance has sparked interest among analysts, highlighting growth potential despite a trimmed outlook for 2026 earnings due to integration costs impacting margins.
Market Response: The stock has seen mixed reactions from analysts, with 42 rating it as a moderate buy, indicating confidence in its recovery potential, particularly as institutional investors are likely to capitalize on current price dips.
Strong Financial Performance: The company reported a solid quarter with a 15% revenue growth to $2.59 billion, outperforming expectations, driven by strong performance in next-gen security and recurring revenue streams.
Future Outlook: Despite some concerns over integration costs affecting profits, Palo Alto's balance sheet remains robust, with expectations for continued growth and potential share buybacks as market conditions improve.
See More
Citi Views PANW's Short-Term Volatility as a Minor Setback
- Muted Earnings Reaction: Although Palo Alto Networks (PANW) results and guidance did not please investors, Citi analyst Fatima Boolani emphasized that this is merely a 'short-term speed bump,' with the overall narrative remaining intact.
- Growth Deceleration: PANW's net new growth services annual recurring revenue (NNARR) has decelerated to 11% YoY, while subscription and support growth has slightly slipped to 13%, raising concerns about the company's future growth potential.
- Acquisition Impact: Despite reaffirming its organic growth targets for FY 2026 and transparently disclosing the impact of acquisitions on annual recurring revenue (ARR) and revenue backlog (RPO), the market perceives insufficient core business growth, leading to stock pressure.
- Rating and Price Target Adjustment: Boolani reiterated her 'Buy' rating on PANW but lowered her price target from $235 to $210 to reflect a reduced earnings multiple, indicating a cautious market sentiment regarding its long-term growth prospects.
See More
Valuation Challenges Intensify for Tech Stocks
- Tech Stock Sell-off: A wave of selling in technology shares is occurring as investors express uncertainty about their future value, particularly as price-to-earnings ratios shrink dramatically, which negatively impacts overall investment sentiment.
- Danaher-Masimo Acquisition Risks: Danaher is acquiring Masimo at nearly 25 times next year's earnings, despite the latter's inability to justify its multiple over the years, raising concerns that could adversely affect Danaher's stock performance.
- CrowdStrike-Microsoft Partnership: CrowdStrike's Falcon platform is now available on the Microsoft Marketplace, which could significantly boost revenue; however, its current P/E ratio of 85 has led to a tepid market reaction, reflecting investor anxiety over high valuations.
- ServiceNow Management Confidence Issues: Despite ServiceNow's announcement of a $5 billion stock buyback and intentions from executives to buy shares, the stock price still fell, indicating market skepticism about its growth prospects amid intensifying AI competition.
See More
Palo Alto Releases Earnings Amid Changing Cyber Threat Environment
- Earnings Report: Palo Alto Networks is set to release its second-quarter earnings report on Tuesday afternoon.
- AI Disruption: The company is also focusing on the impact of artificial intelligence on various industries, indicating a strategic shift in their approach.
See More
Palo Alto Networks to Release Q2 Earnings Results
- Earnings Expectations: Palo Alto Networks is set to release its Q2 earnings report after the market close on February 17, with analysts forecasting earnings of $0.94 per share, an increase from $0.81 per share in the same quarter last year, indicating ongoing improvement in profitability.
- Revenue Growth: The company is expected to report quarterly revenue of $2.58 billion, up 14.2% from $2.26 billion a year earlier, reflecting strong demand and an increase in market share within the cybersecurity sector.
- Acquisition Completion: On February 11, Palo Alto Networks announced the completion of its acquisition of CyberArk for $45 per share in cash plus 2.2005 shares of Palo Alto stock, which will enhance its product offerings and competitive positioning in the market.
- Stock Performance: Following the latest news, Palo Alto's stock rose by 2.6% to close at $166.95, indicating positive market sentiment regarding the company's growth potential moving forward.
See More
Wedbush: AI's Impact on Software Industry Limited
- Investor Concerns: Wedbush Securities analysts highlight that investor fears regarding AI models from OpenAI and Anthropic displacing enterprise software and cybersecurity providers stem from a 'fear of the unknown,' with capital expenditures nearing $700 billion this year yet lacking proof of tech monetization.
- Budget Cutting Risks: Analysts warn that IT budgets could potentially cut 70% by opting for cheaper AI tools, although this theory appears sound on paper, the complexity of modern enterprises renders such a goal nearly impossible to achieve in practice.
- Cybersecurity Industry Landscape: The U.S. cybersecurity sector boasts nearly 9,000 companies, thriving despite numerous mergers and acquisitions, with a projected 33% increase in information security analyst jobs from 2023 to 2033, indicating robust industry growth.
- Palo Alto's Market Positioning: Palo Alto Networks is strategically positioned at the forefront of cybersecurity, expected to monetize the AI cybersecurity total addressable market through its CyberArk deal over the next 12 to 18 months, even as investors remain skeptical about its long-term AI vision.
See More
Palo Alto Networks' Decline Could Be a Blessing if This Condition Remains True
Earnings Guidance Update: Palo Alto Networks' recent earnings guidance has sparked interest among analysts, highlighting growth potential despite a trimmed outlook for 2026 earnings due to integration costs impacting margins.
Market Response: The stock has seen mixed reactions from analysts, with 42 rating it as a moderate buy, indicating confidence in its recovery potential, particularly as institutional investors are likely to capitalize on current price dips.
Strong Financial Performance: The company reported a solid quarter with a 15% revenue growth to $2.59 billion, outperforming expectations, driven by strong performance in next-gen security and recurring revenue streams.
Future Outlook: Despite some concerns over integration costs affecting profits, Palo Alto's balance sheet remains robust, with expectations for continued growth and potential share buybacks as market conditions improve.
See More
Citi Views PANW's Short-Term Volatility as a Minor Setback
- Muted Earnings Reaction: Although Palo Alto Networks (PANW) results and guidance did not please investors, Citi analyst Fatima Boolani emphasized that this is merely a 'short-term speed bump,' with the overall narrative remaining intact.
- Growth Deceleration: PANW's net new growth services annual recurring revenue (NNARR) has decelerated to 11% YoY, while subscription and support growth has slightly slipped to 13%, raising concerns about the company's future growth potential.
- Acquisition Impact: Despite reaffirming its organic growth targets for FY 2026 and transparently disclosing the impact of acquisitions on annual recurring revenue (ARR) and revenue backlog (RPO), the market perceives insufficient core business growth, leading to stock pressure.
- Rating and Price Target Adjustment: Boolani reiterated her 'Buy' rating on PANW but lowered her price target from $235 to $210 to reflect a reduced earnings multiple, indicating a cautious market sentiment regarding its long-term growth prospects.
See More
Valuation Challenges Intensify for Tech Stocks
- Tech Stock Sell-off: A wave of selling in technology shares is occurring as investors express uncertainty about their future value, particularly as price-to-earnings ratios shrink dramatically, which negatively impacts overall investment sentiment.
- Danaher-Masimo Acquisition Risks: Danaher is acquiring Masimo at nearly 25 times next year's earnings, despite the latter's inability to justify its multiple over the years, raising concerns that could adversely affect Danaher's stock performance.
- CrowdStrike-Microsoft Partnership: CrowdStrike's Falcon platform is now available on the Microsoft Marketplace, which could significantly boost revenue; however, its current P/E ratio of 85 has led to a tepid market reaction, reflecting investor anxiety over high valuations.
- ServiceNow Management Confidence Issues: Despite ServiceNow's announcement of a $5 billion stock buyback and intentions from executives to buy shares, the stock price still fell, indicating market skepticism about its growth prospects amid intensifying AI competition.
See More
