Why Palo Alto Networks, Inc. Shares Could Pop 25%

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  ) rallied 3% today after Goldman Sachs assumed coverage on the network security technologist with a Conviction Buy rating.

So what: Along with the bullish call, analyst Matthew Niknam planted a price target of $97 on the stock, representing about 28% worth of upside to yesterday's close. So while contrarian traders might be turned off by Palo Alto's price strength over the past year, Niknam's call could reflect a sense on Wall Street that its growth prospects still aren't fully baked into the valuation.

Now what: Goldman offered three reasons why Palo Alto's risk/reward trade-off is particularly attractive at this point: "(1) our expectation for significant share gains as the key disruptor in the network security market, at a time when Security is top of mind and enterprises are reassessing their infrastructure post breaches and a potential firewall refresh ... (2) above-consensus expectations for growth heading into F2015 (GS is +3% vs. the street) given a robust product pipeline and benefits of a more fully ramped Sales force, and (3) a stronger than expected ramp in FCF, as the business scales past elevated near-term investments and the revenue mix continues toward a more recurring and visible stream (Subscription/Maintenance)." Given Goldman's solid stock-picking track record -- currently ranked in the top 15% of our CAPS community -- growth-oriented Fools might want to take a closer look at Palo Alto. 

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