Palo Alto Networks' growth, outlook in AI earn plaudits from veteran trader, analysts

TheStreet Pro's Stephen Guilfoyle has something on his mind.

“I mean, I know the sector has its ups and downs,” the veteran trader wrote in his latest column, “but really, is demand for what cybersecurity firms do ever going to wane?”

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That's a fair question and the answer, according to industry analysts, is a resounding “no.” Cybersecurity companies are seeing high demand as cyberattacks surge and protecting data becomes that much more important.

A study by the consulting firm McKinsey & Co. found that artificial intelligence enabled cybercriminals “to automate and scale attacks, producing convincing phishing emails, malware, and other tools more quickly and effectively than ever before.”

And that ability comes with a big price tag. Cybercrime is expected to cost businesses as much as $10.5 trillion this year and as much as $15.63 trillion by 2029, according to Statista.

TheStreet Pro's Guilfoyle: PANW balance sheet ‘golden'

“Of course, a next-generation, disruptive technology could change things at some point,” Guilfoyle writes, “but every business and every household needs to secure their information and their systems from the bad actors out there that always seem to be one step ahead of most of us.”

Palo Alto Networks CEO Nikesh Arora says AI has created opportunities for cybercriminals.

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Guilfoyle said he's staying invested in what he considers the best-in-class cybersecurity companies. They are CrowdStrike (CRWD) and Palo Alto Networks (PANW) , and if he were to expand the list, Zscaler (ZS) would be third.

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Palo Alto Networks topped Wall Street's fiscal-fourth-quarter estimates and issued better-than-expected guidance for the fiscal 2026 first quarter and full year.

Guilfoyle looked over the numbers and declared that “this balance sheet is golden. I am impressed. Strong quarter. Strong guidance. Probably strong cash flows. Very strong balance sheet. Growing business. Growing backlog. Not much to complain about.

“This gets me very excited about CrowdStrike [earnings] next week.”

PANW Chairman and CEO Nikesh Arora told analysts that the quarter's results reflect a years-long strategic effort to “[build] the future of cybersecurity before it arrives.”

Generative AI, which produces original text, images, videos and other data from existing content, is being adopted faster than any previous technology.

“A recent internal study amongst our customers showed Gen AI traffic is up over 890% in 2024,” he said. “Following this, data-security incidents related to GenAI more than doubled since last year. With this rapid adoption of AI comes a new and complex attack surface.”

Guilfoyle's potential target price on PANW: $220

Guilfoyle cited the company’s 200-day simple moving average, which is helpful for identifying trends.

“The 200-day SMA is the big kahuna on this chart,” he said. “If PANW can hold that [level,] portfolio managers will be forced to increase exposure to the stock. That will likely break the back of the bearish pattern in play.”

And if that line holds, Guilfoyle said his target price will be around $220.

Several investment firms issued research reports following Palo Alto Networks' earnings report.

Bank of America Securities upgraded the company to buy from neutral and reiterated a $215 price target after what it called an “impressive performance on all fronts” in fiscal Q4, according to The Fly.

The outlook exceeded expectations and PANW's strategy “appears to be working well,” the analyst told investors.

On July 30 Palo Alto Networks said it agreed to acquire identity-security company CyberArk (CYBR) for $25 billion of cash and stock.

B of A said it raised its rating on PANW given that the company's fundamentals are solid, its stock is down about 15% since the CyberArk announcement, and the investment firm's price target suggests 22% upside potential.

Scotiabank analyst Patrick Colville raised its price target on Palo Alto Networks to $228 from $225 and affirmed an outperform rating.

Colville said PANW comfortably beat profit and revenue estimates. And he said the stock could go higher as PANW competes in as well in agentic AI, systems that can make decisions and take actions without input from humans.

Palo Alto Networks also said Nir Zuk, founder, chief technology officer and a director, would retire. Lee Klarich, currently chief product officer, will succeed Zuk on the board and as CTO.