MS ‘kilos the desk’ on Palo Alto Networks, says Okta, others ‘look engaging’

Funding agency Morgan Stanley famous that cyber safety firms will not be “immune” to a worldwide financial slowdown like different areas of IT spending, however they’re “comparatively extra defensible” and bigger firms, corresponding to Palo Alto Networks (NASDAQ:PANW), might even see much less of an impression than others.

A bunch of analysts, led by Hamza Fodderwala, famous that the most important cuts got here from firms corresponding to Varonis Techniques (VRNS) and Rapid7 (RPD), whereas the “greatest” third-quarter outcomes have come from these like CyberArk (CYBR) and Test Level Software program (CHKP), which have excessive publicity to Europe, the Center East and Africa, regardless of issues a couple of recession in Europe.

“The most important estimate cuts in [the third-quarter] had been from smaller firms promoting predominantly level merchandise, in our view,” the analysts wrote. “This aligns with our basic choice for leaning into consolidators, most of that are reporting off-calendar [such as] Palo Alto Networks (PANW) and CrowdStrike (NASDAQ:CRWD).”

The analysts added that firms which might be capable of present profitability are being rewarded, with development more likely to be slower subsequent 12 months than this 12 months. The analysts added that there are a number of firms that might pivot to profitability, notably SentinelOne (NYSE:S), which the analysts mentioned may see a “re-rating” if the corporate had been to focus on breakeven free money circulation inside the subsequent 12 months.

They added that Palo Alto Networks (PANW) is the agency’s prime decide, given its engaging valuation and the truth that free money circulation is rising at greater than 30%.

For Okta (NASDAQ:OKTA), the analysts famous the inventory is “possible nearing a backside at 3.5X EV/[calendar year 2023 revenues] (2.8X on [calendar year 2024]) on our beneath consensus forecasts and will probably re-rate on constructive margin commentary/outlook on their Analyst Day this week.”

Late final month, funding agency Cantor began protection on Palo Alto Networks (PANW) with an obese score.