Why Palo Alto Networks Stock Popped Today
Key Points
AI CEOs Elon Musk, Dario Amodei, and Sam Altman highlighted AI risks over the weekend.
Investors are buying cybersecurity stocks to hedge against these risks.
Palo Alto stock is one beneficiary -- but it costs a lot.
- 10 stocks we like better than Palo Alto Networks ›
Palo Alto Networks (NASDAQ: PANW) stock soared 13.6% through 1:20 p.m. ET Monday after leading AI CEOs Elon Musk, Dario Amodei, and Sam Altman all warned of the dangers of artificial intelligence getting too... artificially intelligent, raising cybersecurity fears.
Investors are flocking to cyber stocks as a potential answer to AI worries, and Palo Alto stock is a prime beneficiary of this trend today.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
Wall Street loves Palo Alto stock
Helping goose Palo Alto's gains, moreover, are two analyst notes encouraging the trend. As StreetInsider.com points out, investment bank Wedbush upgraded Palo Alto stock to outperform last week, setting a $400 price target on the $376 stock. Goldman Sachs is nearly as optimistic, having recently raised its price target to $390 per share based on Q4 earnings.
A third analyst reiterated support for Palo Alto stock last week as well, with Cantor Fitzgerald insisting the stock is worth $425 after a fourth-quarter earnings report that "beat across every guided metric" and that similarly "initiated FY27 guidance above consensus across the board."
Valuing Palo Alto Networks stock
But I'll be honest here: Concerns over an impending AI apocalypse notwithstanding, I have serious reservations about the valuation of this stock.
Palo Alto shares cost 900 times trailing earnings, after all, an on its face ludicrous valuation. Granted, free cash flow is strong, lowering the company's price-to-free cash flow ratio to "only" 66x. That still requires the stock to be growing at very strong double-digit rates to win it a buy in my book, however. The fact that most analysts expect Palo Alto to grow earnings by only 17% annually over the next five years makes the stock look more than 3x overvalued to me.
I would not be a buyer at today's price.
Should you buy stock in Palo Alto Networks right now?
Before you buy stock in Palo Alto Networks, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palo Alto Networks wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $417,413!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,341,294!*
Now, it’s worth noting Stock Advisor’s total average return is 950% — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of September 14, 2026.
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.
Recommended Articles
