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 a dear acquisition, and on Thursday, buyers have been clearly getting fearful about the associated fee. Analysts, too, began to specific 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 throughout 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.
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CyberArk is a specialist within the area of interest space of id safety, and Palo Alto stated that its possession of the enterprise will make the section “a core pillar of the corporate’s multi-platform technique.” The buyout has been unanimously authorised 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 suppose that is price it, together with that frequent downgrader, KeyBanc’s Eric Heath.
Nicely earlier than market open Thursday, Heath enumerated a number of main strategic considerations in regards to the deal, in response to stories. He forged doubt on the potential synergies of the 2 companies, and opined that clients are prone to choose utilizing a specialised firm purely for id safety relatively than a broad cybersecurity providers supplier, amongst different components.
Unkind cuts?
Different analysts have been equally bearish, though they did not go so far as to downgrade their Palo Alto suggestions. They did scale back their value targets on the shares, nevertheless. That clutch of pundits included Mizuho’s Gregg Moskowitz, who minimize $15 from his honest 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.
