Will Palo Alto Networks stock go back to $350? 1 Wall Street analyst thinks so.

Palo Alto Networks (PANW -1.83%) Stocks were sitting on the wall. Palo Alto Networks is down significantly (down 28.5% since last month’s results). Can all the king’s horses and all the king’s men get Palo Alto Networks stock back to $350?

That’s the question facing investors today, as equity researcher Redburn Atlantic raised its price target on Palo Alto stock to $350. That’s roughly what the stock was worth before Palo Alto reported its second-quarter fiscal 2024 results on Feb. 21 and warned that its cybersecurity business was slowing.

Is Palo Alto stock a buy?

Second quarter 2024 performance was excellent. Sales increased 19% year-over-year and profits increased nearly 19-fold.. But Palo Alto CEO Nikesh Arora surprised investors in the third quarter with talk of a new “platformization and integration” strategy that could slow revenue growth to 13% year-over-year and reduce billings growth to 2%.

But Redburn analyst Nina Marques isn’t afraid. In the short term, “platformization” may slow Palo Alto’s growth. This is because the company offers customers a discount when they sign up for bundled services. But in the long term, she sees platformization providing “huge returns” as Palo Alto leverages artificial intelligence to enhance cybersecurity across its products. Yes, Marques says Palo Alto is an AI stock.

So how can this play out in practice? With a current market capitalization of $92 billion and an expected long-term growth rate of 18.5%, we’d like to see Palo Alto generate about $5 billion in free cash flow to justify its current valuation. But most analysts don’t see this. This will happen before 2027. this The stock is expected to generate $3.1 billion in free cash flow this year, which means Palo Alto is probably overvalued even at its current cost of $281. that clearly Unless the company is growing much faster than most analysts think, it’s not worth $350 per share.

Simply put, Redburn was wrong about this. Palo Alto may be a great company, but its stock price isn’t going to hit $350 anytime soon.