Shares of the cybersecurity company, Palo Alto Networks (NASDAQ: PANW) were up in morning trading at the time of publishing on Wednesday after the company posted strong fiscal Q3 results and gave upbeat guidance.
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On the earnings call, Palo Alto Networks’ Chairman and CEO Nikesh Arora emphasized that its product Cortex XSIAM, an AI-driven security platform was entirely “homegrown.” Arora stated this as the company has taken a break from its M&A activity spanning over the last few years even as it sits on $2 billion in cash.
The CEO considers the current market too expensive from the M&A standpoint and commented, “I feel very comfortable with the amount of cash we have on our balance sheet and I believe it is our job to keep our heads down, and keep executing because it’s a tough market.”
Arora added that over the next 12-24 months, the company is embracing “generative AI” and is studying “the adverse impact that generative AI could have in terms of ads using generative AI to build new malware, to try and attack our customers, and there’s a lot of work we’re doing as well to make sure we are able to protect our customers against any such activity that is conducted using generative AI.”
Meanwhile, following the upbeat results, Wells Fargo analyst Andrew Nowinski kept a Buy rating on the stock but raised the price target to $265 from $250, the highest price target on the Street.
The analyst pointed out that PANW had signed several seven- and eight-figure Prisma deals in Q3, with annual recurring revenue attributed to Secure Access Service Edge (SASE) increasing 50% year-over-year while its customers went up by 33% to more than 4,200.
Nowinski commented, “This strong demand suggests Zero Trust is a top priority for customers, and aligns with the positive pre-announcement from Zscaler. Palo Alto is also benefiting from improved sales productivity, as over 80% of sales reps added to the Prisma SASE pipeline for Q4.”
Overall, analysts are bullish about PANW stock with a Strong Buy consensus rating based on 17 Buys and one Hold.
