What happened
Palo Alto Networks (PANW -1.71%) just couldn't connect with investors on Wednesday. The company's shares sank on a day when many tech industry peers recovered from the market meltdown on Tuesday; ultimately Palo Alto closed down by 0.5%. A new and bearish analyst take on the company had much to do with that.
So what
The responsible party was Wolfe Research's Strecker Backe, who took a large sword to his price target on Palo Alto stock. He now feels that its proper level is $238 per share, well down from his previous estimation of $715 per share.
This doesn't, however, make Palo Alto an undesirable investment, according to Backe. He is maintaining his outperform (buy, in other words) recommendation on the cybersecurity stock.
Despite the analyst's drastic price target chop, he's still clearly optimistic on the company's prospects, and he's not alone. After the company delivered a double beat in its fiscal fourth-quarter earnings last month -- and announced a stock split, a popular move these days -- many analysts actually raised their price targets.
One of that clutch of raisers was Guggenheim's John DiFucci, who bumped his price target up to $640 per share from $625 while keeping his buy recommendation intact. DiFucci reiterated his belief that Palo Alto is in the midst of a product refresh cycle, and is well placed to take advantage of both that and a broader client migration to next-generation cybersecurity solutions.
Now what
While a fair price for Palo Alto stock might be up for debate, it's hard to argue against the cybersecurity sector's bright future. If anything, online threats from bad actors will only increase and intensify, driving up demand for the solutions provided by the company and its contemporaries. The investor reaction to Backe's price target cut, while understandable, isn't necessarily justified.
