KeyBanc lifts Palo Alto Networks rating, sees security budgets accelerating

 KeyBanc Capital Markets upgraded Palo Alto Networks (NASDAQ: PANW) to Overweight from Sector Weight with a $380 price target in a new note, saying the stock’s 20% pullback over the past month creates an attractive entry point as cybersecurity spending is set to accelerate.

Analyst Eric Heath expects security budgets to grow materially in 2027 as AI drives a more dangerous threat environment and the market for securing AI matures. 

The analyst noted that CISOs at a KeyBanc event in New York suggested budget growth would accelerate from single digits early this year to the mid-teens by year-end, and to more than 20% in 2027. Even security chiefs with more moderate expectations remained upbeat.

“Even among this CISO group expecting more moderate growth, they remarked how you should ‘never let a good crisis go to waste,’ and they have an ‘open checkbook,’” Heath wrote.

KeyBanc’s survey of resellers is also said to have pointed to strength, with all partners meeting or beating plans in the third quarter and security growth accelerating for a fourth straight quarter.

The analyst said Palo Alto, along with CrowdStrike, is a key beneficiary as customers consolidate their security spending with fewer vendors. He pointed to the company’s broad product lineup in areas that are top priorities for security chiefs, including securing AI, security operations, identity and network security.

“Further, we see the platform vendors with the richest volume of proprietary data best positioned to provide agentic cybersecurity capabilities and/or be defensible to incremental competition from LLM vendors expanding into the SOC,” Heath said.

KeyBanc’s checks for Palo Alto’s fiscal first quarter were also positive.