Overview
Berenberg this week began coverage of Palo Alto Networks with a Buy rating and set a $215 price target, according to a research note by analyst Rahul Chopra. The broker contends that a widespread sell-off across software stocks linked to the "AI eats software" narrative has produced a buying opportunity in a leading cybersecurity company.
Valuation and sector narrative
Chopra points out that the cybersecurity space has been affected by the narrative that AI will displace existing software business models, a trend that has pressured technology shares since late 2025. He notes this has left Palo Alto trading at a valuation roughly 30% below its 2024-25 average multiple, even though the company has shown no meaningful deterioration in its organic growth trajectory.
"We believe this de-rating is particularly overdone and view AI as an opportunity rather than a risk; platform vendors are likely to benefit disproportionately," Chopra wrote.
How AI changes the security landscape
The note argues that as companies weave AI into their operations, the potential attack surface grows - with more data, more cloud applications, and more identities to secure. Chopra also highlights the emergence of agentic AI, saying it "materially expands the TAM for cybersecurity vendors as AI agents need to be protected."
He adds that cybersecurity platforms produce proprietary, real-time threat intelligence across large customer bases, creating a data moat that he says is not easily replicated by AI model providers.
Platformisation: the central thesis
At the core of Berenberg’s bullish case is Palo Alto’s focus on "platformisation" - replacing multiple point solutions with integrated offerings across network security, cloud security, and security operations. The brokerage estimates Palo Alto has completed 1,550 platformisations to date, up from 850 in mid-2024, and notes management is targeting 2,500 to 3,500 platformisations by fiscal 2030.
Chopra believes consensus expectations underprice this momentum, writing: "We think consensus understates both the pace and the economics of the strategy, we estimate 6-14% upside to FY30E consensus revenues." Berenberg judges the market currently implies roughly 2,600 platformisations - near the lower end of management’s stated range.
Customer economics
Berenberg highlights the economics of customers that move to the platform. Palo Alto reports a net revenue retention rate of 119% for this cohort and low single-digit gross churn. The brokerage points to a wide spending gap between customers using multiple platforms and those on a single product: customers on all three platforms spend about $4.1 million per year, compared with $86,000 for single-platform customers.
Acquisitions and addressable market
The research note marks Palo Alto’s recent purchases of identity security firm CyberArk for $19 billion and observability provider Chronosphere for $3 billion as material catalysts. Berenberg estimates these deals expand Palo Alto’s addressable market to about $206 billion.
Valuation framework
Berenberg’s $215 price target is derived from a discounted cash flow model that uses a 9% weighted average cost of capital. That target implies a forward EV/sales multiple of 13x, which the note says is broadly consistent with where the stock traded through 2024 and 2025.
"We believe current multiples do not reflect the improving portfolio quality, the success of the platformisation strategy, and Palo Alto’s best-in-class 'Rule-of-40' within the software peer group," Chopra added.
Bottom line
Berenberg’s initiation frames the recent sector sell-off as an opportunity to buy into what the broker views as one of cybersecurity’s strongest franchises, supported by a platform transition, attractive customer economics, and acquisitions intended to broaden the company’s market opportunity.