A number of analysts poured chilly water on the corporate following its announcement of an enormous buy.
Palo Alto Networks (PANW -5.29%) made waves Wednesday when it introduced an expensive acquisition, and on Thursday, buyers had been clearly getting frightened about the price. Analysts, too, began to precise concern, with two even downgrading their advice on the shares.
With these headwinds blowing in its face, Palo Alto’s inventory misplaced greater than 5% of its worth through the latter a part of the buying and selling day. That was a far steeper decline than the 0.4% slide of the benchmark S&P 500 index.
The $25 billion query
Palo Alto’s asset-to-be is peer cybersecurity firm CyberArk Software program, for which it agreed to pay roughly $25 billion in a cash-and-stock deal.
Picture supply: Getty Pictures.
CyberArk is a specialist within the area of interest space of id safety, and Palo Alto mentioned that its possession of the enterprise will make the phase “a core pillar of the corporate’s multi-platform technique.” The buyout has been unanimously accepted by the boards of administrators of each corporations, and is anticipated to shut within the second half of Palo Alto’s fiscal 2026.
Palo Alto definitely is not a poor firm. Nonetheless, $25 billion is a significant outlay. A number of analysts do not assume that is value it, together with that frequent downgrader, KeyBanc’s Eric Heath.
Effectively earlier than market open Thursday, Heath enumerated a number of main strategic considerations in regards to the deal, in line with studies. He forged doubt on the potential synergies of the 2 companies, and opined that clients are prone to desire utilizing a specialised firm purely for id safety somewhat than a broad cybersecurity companies supplier, amongst different elements.
Unkind cuts?
Different analysts had been equally bearish, though they did not go so far as to downgrade their Palo Alto suggestions. They did scale back their worth targets on the shares, nevertheless. That clutch of pundits included Mizuho’s Gregg Moskowitz, who minimize $15 from his truthful worth evaluation on the inventory to $210 per share. He did keep his outperform (i.e., purchase) advice, nevertheless.
Eric Volkman has no place in any of the shares talked about. The Motley Idiot recommends Palo Alto Networks. The Motley Idiot has a disclosure coverage.
