Palo Alto Networks Delivers Strong FCF Margins - Is PANW Stock Set to Rise?

Palo Alto Networks (PANW) reported better-than-expected fiscal Q4 free cash flow (FCF) and FCF margins on Sept. 1, and management expects margins to rise. PANW stock could be worth 38% more at $461 per share.

PANW closed at $333.26 on Friday, Sept. 4. That's down from before its earnings release. But could it be poised to rise? I think so. Its strong FCF margins and analysts' higher revenue forecasts are hard for the market to ignore. Let's look at.

The bottom line is that this cybersecurity software company's revenue and free cash flow (FCF) remained strong. I discussed this in a recent pre-earnings release Barchart article on Aug. 24 (" Palo Alto Networks Could Be Worth Over $433 - 21% More - as Analysts Hike Their Revenue Forecasts" ).

I wrote that if the company could deliver at least a 37.5% FCF margin for its fiscal year ending July 31, 2026, as management had projected in its Q3 release, PANW could be worth at least $433 per share.

It did better than that. Management reported its trailing 12-month (TTM) adjusted FCF margin was 38.4% , much better than expected. That also exceeded last year's 38.0% adj. FCF margin.

This strong performance can be seen on page 16 of its earnings presentation deck:

Moreover, Palo Alto Networks management said it expects a 38% margin in FY 27 (ending July 31, 2027) and is still on track to deliver a 40% margin FY 2028.

As a result, analysts have raised their ongoing revenue forecasts and price targets.

For example, analysts have raised their FY 2027 revenue forecasts to $14.17 billion (up from $13.84 billion in my last Barchart article), or +23.4% over its $11.48 billion in FY 26.

In addition, analysts have introduced FY 2028 revenue forecasts of $16.19 billion. So, over the next two years, sales are expected to rise 41%.

Let's use a $14.675 billion projection for the next 12 months (NTM). That incorporates 3/4ths of the FY27 and one-quarter of the FY28 analysts' forecasts.

Using a 38.4% adj. FCF (i.e., the same as in FY 26), its adj. FCF could rise to over $5.6 billion:

$14.675 billion revenue NTM x 0.384 = $5.635 billion adj. FCF