Why Palo Alto Networks Inc. Will Pop to $90

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Palo Alto Networks Inc. (NYSE: PANW  ) had a roller-coaster of a day on Tuesday after FBR Capital upgraded the network security technologist from "market perform" to "outperform."

So what: Along with the upgrade, analyst Daniel Ives boosted his price target to $90 (from $80), representing about 25% worth of upside to yesterday's close. So while contrarians might be turned off by the stock's strength over the past several months, Ives' call might reflect a strengthening sense on Wall Street that Palo Alto has plenty of room to fly.

Now what: FBR boosted its 2014 revenue outlook for Palo Alto from $570.6 million to $574.2 million and its 2015 view from $750.0 million to $762.3 million. "Our checks indicate faster-than-expected adoption of Palo Alto's appliances/services and a more productive sales force, coupled with ongoing secular strength," said Ives. "To this point, we believe strong cybersecurity spending is leading to the company's good progress in the field for both its appliances and SaaS business (e.g., Wildfire) as it appears a solid product cycle and subscription offering are giving Palo Alto's tailwinds that we believe position it for robust top-line/billings growth (we estimate 45% revenue growth for FY14 and 33% for FY15 excluding the Cyvera acquisition) over the next 12 to 18 months." With the stock already up about 60% over the past six months and trading at a steep-ish price-to-sales of 11, however, much of those prospects might already be baked into the valuation. 

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