From Financial Modeling Prep: 2025-01-06 19:21:00

Palo Alto Networks (NASDAQ:PANW) shares dropped over 2% after Guggenheim downgraded the stock to Sell with a $130 price target. Concerns about declining new ARR and softening business momentum led to the decision, despite the company’s strong presence in cybersecurity.

Although PANW stock has surged 40% since February, total new ARR has fallen for five straight quarters, indicating potential structural challenges. Field checks suggest a slight weakening in momentum over the past year, raising red flags for the company’s future performance.

Cybersecurity remains a top IT spending priority, but the sector has shown the weakest new ARR growth trends in the software industry this year. PANW’s “Platformization” strategy seems ineffective, casting doubt on its ability to drive growth in the current market environment.

Expected moderation in U.S. Federal IT spending could further impact PANW’s growth. Adjustments for share repurchases tied to stock-based compensation dilution suggest a more realistic FCF margin of 25-26%, lower than the company’s guidance of 37-38%.



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