Should You Buy Palo Alto Networks (PANW) Stock Before Earnings? Here’s What You Need to Know

Cybersecurity giant Palo Alto Networks (PANW) is gearing up for its earnings report—and traders are placing their bets. Will this be another beat-and-raise spectacle, or is the stock priced for perfection?

The Bull Case: Fort Knox in the Cloud

Palo Alto’s firewall dominance and cloud security suite keep enterprises locked in. If earnings show recurring revenue growth, the stock could break out.

The Bear Trap: Valuation vs. Volatility

With a premium multiple, even a slight miss could trigger a sell-off. Remember: Wall Street loves a growth story… until it doesn’t.

The Bottom Line

High risk, high reward. If you’re buying before earnings, size the position like a hedge fund—small enough to lose, big enough to matter. Or just wait and let the algo traders panic first.

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Ideally, earnings per share should grow faster than revenue, as that WOULD demonstrate a high degree of operating and financial leverage in the business. Nevertheless, it’s worth noting that Palo Alto has beaten earnings estimates every quarter since its 2021 Q4. Therefore, it’s possible that EPS growth can still outpace revenue growth.

In addition, Palo Alto’s revenue mostly comes from subscriptions, which allows it to have steady and fairly predictable growth. It’s also worth noting that subscriptions have been growing consistently over the past several years, as pictured below.

Options Traders Anticipate a Large Move

Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings MOVE is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a large 7.7% move in either direction.

What Is the Price Target for PANW?

Turning to Wall Street, analysts have a Strong Buy consensus rating on PANW stock based on 29 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average PANW price target of $227.50 per share implies 12.1% upside potential. Separately, TipRanks’ AI analyst has an Outperform rating with a $244 price target.