Palo Alto Networks Inc (NYSE:PANW, ETR:5AP) is set to report a solid quarter when it hands down its fiscal first quarter 2025 financial results on Wednesday, November 20, Bank of America analysts believe.
Wall Street analysts, on average, expect the cybersecurity firm to report revenue to grow almost 13% year-over-year to $2.12 billion while earnings per share (EPS) are expected to grow to $1.48 from $1.38 in the year-ago quarter.
Bank of America analysts expect strong growth in Next-Generation Security Annual Recurring Revenue (NGS ARR), estimated at 35% year-over-year and signs of recovery in firewall orders.
“We believe Palo Alto has historically elongated its backlog drawdown, yet expect product revenues to be weak in Q1 and Q2, at 0% to 1% year-over-year,” they wrote.
“However, the underlying order environment is improving, and we therefore believe order activity has picked up in Q1 and will continue to recover in the coming quarters."
Analysts also believe free cash flow margins will show limited improvement, especially given management’s plans to limit or scale down vendor financing.
They see the US Federal segment as a directional headwind but noted the management previously stated this has been excluded from guidance.
“We do expect this segment to pick up, and recent comments from the Defense Information Systems Agency suggest it will roll out the Thunderdome program to 60 sites in fiscal 224 and accelerate further in fiscal 2025,” analysts wrote.
“On the other hand, we still flag the segment as a directional point of caution given Cisco's recent comments on the magnitude of the weakness.”
Palo Alto’s high valuation limits upside, analysts added.
“The stock is priced for near-perfection,” they noted. “As such, we remain on the sidelines and maintain our Neutral rating, despite our positive stance on the company's fundamentals.”
The analysts awarded the stock a $400 price target. Palo Alto shares traded hands at $386 on Monday afternoon.