Morgan Stanley lifts Palo Alto Networks target ahead of earnings
The bank increases its 2027 free cash flow per share multiple to 37x, citing robust growth in remaining performance obligations and product revenue ahead of the June 2 fiscal third-quarter report.
Morgan Stanley has raised its price target for Palo Alto Networks (PANW) to $253 from $223, maintaining an Overweight rating as the cybersecurity firm prepares to report its fiscal third-quarter results. The revision, announced on 20 May 2026, reflects the bank’s confidence in the company’s ability to capitalise on strong demand for firewall refreshes, Prisma SASE, Cortex XSIAM, and AI security solutions.
The upgrade comes at a pivotal moment for the stock, which closed at $247.55 on 18 May 2026, near a fresh all-time high. This represents a significant turnaround for a share that fell roughly 20% over the prior year, with the stock now climbing 78% from its 52-week low of $139.57. The move precedes the company’s earnings release on 2 June 2026, with analysts positioning ahead of the data.
Morgan Stanley analysts Meta Marshall and Keith Weiss have increased the valuation multiple for estimated 2027 free cash flow per share to 37x from 32x. The firm anticipates that Palo Alto will beat consensus estimates on remaining performance obligations, a metric indicating contracted future revenue. They project RPO growth closer to 33% year-on-year, exceeding the midpoint of management’s guidance, while expecting product revenue to grow well above the roughly 25% rate guided by the company.
The positive outlook is supported by broader sector strength, with competitors Fortinet and Cisco reporting robust results in their recent earnings. Fortinet recorded 41% product revenue growth in its first quarter, while Cisco beat expectations on networking, signalling a healthy firewall market. Additionally, Palo Alto Networks launched Idira on 12 May 2026, a next-generation identity platform that integrates its $25 billion CyberArk acquisition to manage access for humans, machines, and AI agents.
Other Wall Street firms have also raised their targets, with Oppenheimer and Truist setting targets at $275, and RBC Capital lifting its target to $255. However, the stock trades at a premium valuation, and Morgan Stanley notes that any growth wobble could impact shares, as evidenced by recent declines despite earnings beats. Investors will look for confirmation of RPO growth, product revenue exceeding 25%, and early adoption of the Idira platform during the upcoming report.
