After falling from $220 in October 2025 to nearly $140 in February, Palo Alto Networks (PANW +2.84%) stock has been recovering; this recovery gained strength this morning thanks to some kind words from Berenberg analyst Rahul Chopra.
Palo Alto stock is up 3.8% through 11:30 a.m. ET.
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Who’s afraid of AI?
The story surrounding Palo Alto is well-known. Worries that artificial intelligence will “eat software stocks” reached a fever pitch when Anthropic unveiled its Claude Mythos LLM last month. But Chopra believes these worries are both overstated and transitory — which is to say they will subside, and Palo Alto will recover its highs shortly.
The analyst is initiating coverage of Palo Alto today with a buy rating and a $215 price target, arguing that far from a threat to cybersecurity stocks like Palo Alto, AI will actually give these kinds of companies new tools to enhance their business and scale up, at the same time as fears of AI-powered hacking increase demand for cybersecurity products.
Today’s Change
Current Price
What it means for Palo Alto stock
Chopra argues that “Palo Alto has a strong track record of sustained compounding,” and points out that, so far at least, AI hasn’t done much to slow the stock down. To the contrary, revenues that averaged less than 15% growth over the past two years accelerated past 15% in 2025.
But that’s not what worries me.
Valued at $137.5 billion in market cap, Palo Alto stock costs 38 times free cash flow and 94 times trailing earnings. That’s cheaper than the stock fetched last year, but still expensive for a stock projected to grow earnings only in the low-teens over the next five years.
I think Palo Alto stock remains overpriced, and until it gets even cheaper, I will not be a buyer.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
