After Guggenheim Securities downgraded the cybersecurity company to Sell from Neutral, Palo Alto Networks (PANW, Financial) shares dropped 1.5% in noon trade Monday under worries over its recent business performance and a projected downturn in U.S. federal IT investment. Setting a price estimate of $130 for the stock, Guggenheim essentially 30% below its present level.
Analyst John DiFucci pointed out a number of "questionable quarters" during the past year, noting that although the stock typically declines momentarily, it has generally risen rapidly. Rising 40% from their February 2024 low, Palo Alto Networks shares outperform the 24% gain in the iShares Expanded Tech-Software Sector ETF (IGV) and the S&P 500's 19% increase during the same period.
The analyst also noted a five-quarter run of declining annual recurring income (ARR) for the company's whole operation. This trend and a more subdued federal expenditure projection begged questions about the viability of Palo Alto Network expansion.
