Morgan Stanley has reduced its 12-month price target for Palo Alto Networks (NASDAQ: PANW) to $223 from $245, maintaining an Overweight recommendation on the shares. At the reported market price of $163.50, the revised target implies roughly a 36% upside. The current price is cited as being about 27% below the stock's 52-week high of $223.61.
The broker emphasized that Palo Alto Networks remains well-positioned across key secular trends in security, including the industry move toward integrated platforms, the expanding footprint of hyperscalers and the growing role of artificial intelligence in security operations. InvestingPro data referenced by the firm identifies Palo Alto Networks as a significant participant in the Software industry and assigns the company a financial health score of "GOOD."
Despite that strategic positioning, Morgan Stanley flagged that organic net new ARR (NNARR) and services revenue for the most recent quarter came in slightly below its expectations. The firm added that the company’s organic guidance remained essentially in-line with prior outlooks. The combination of the marginal shortfall and market dynamics reportedly prompted the stock to fall about 8% in aftermarket trading following the earnings release.
In its commentary, Morgan Stanley noted that some investor crowding into Palo Alto Networks during the quarter - positioning the shares as a relatively safe harbor - contributed to a market reaction that penalized anything short of perfect results. On a valuation basis, the firm described the stock as offering an appealing entry point at roughly 20 times enterprise value to estimated 2027 free cash flow (EV/27e FCF), characterizing Palo Alto Networks as an attractive opportunity for a company expected to deliver teen-rate free cash flow growth.
Separately, Palo Alto Networks continues to expand its product and service footprint. The company announced its intent to acquire Koi, a specialist in Agentic Endpoint Security, with the acquisition aimed at strengthening the firm’s capabilities in addressing security gaps created by AI tools operating on enterprise endpoints. The deal is intended to fold Koi’s technology into Palo Alto Networks’ existing platforms to give organizations enhanced visibility into AI-driven operations.
The company also launched Unit 42 Managed XSIAM 2.0, a managed security operations center service that includes a Breach Response Guarantee. That guarantee provides customers with 250 hours of incident response support and is positioned as a response to the market’s cybersecurity talent shortage by ensuring specific security outcomes for clients.
In a strategic corporate move tied to its acquisition of CyberArk Software, Palo Alto Networks said it will dual list its shares on the Tel Aviv Stock Exchange following the $25 billion deal for the Israeli company. The firm indicated that the dual listing would make it the largest company by market capitalization on the TASE.
On valuation and sentiment from other brokers, BTIG lowered its price target for Palo Alto Networks to $200 from $248 while keeping a Buy rating. BTIG attributed the change to "multiple compression across software," even as channel checks pointed to improved sentiment.
Taken together, these developments underscore Palo Alto Networks’ efforts to broaden its technology set and managed services while the market evaluates near-term execution versus long-term secular positioning. Analysts appear to be balancing recognition of the company’s strategic strengths with more cautious near-term revenue execution and broader sector multiple dynamics.
Summary
Morgan Stanley cut its price target on Palo Alto Networks to $223 from $245 but kept an Overweight rating. The firm highlighted the company’s strong alignment with platformization, hyperscaler activity and AI-driven security trends, while noting slight shortfalls in organic NNARR and services revenue. The stock dropped approximately 8% after hours. Additional corporate developments include the planned acquisition of Koi, the launch of Unit 42 Managed XSIAM 2.0 with a Breach Response Guarantee, a planned dual listing on the Tel Aviv Stock Exchange after the CyberArk acquisition, and BTIG’s target reduction to $200 from $248.