Michael Vi/iStock Editorial via Getty Images
KeyBanc Capital Markets reiterated its Overweight ratings on Palo Alto Networks (NASDAQ:PANW), CrowdStrike (NASDAQ:CRWD), Zscaler (ZS), MongoDB (MDB) and Snowflake (SNOW) ahead of the companies’ quarterly earnings.
The firm also reiterated its Sector Weight ratings on Okta (OKTA) and SentinelOne (S).
Palo Alto Networks (PANW): KeyBanc increased its price target on the stock to $384 from $355 and raised its billings, revenue, remaining performance obligations, or RPO, and free cash flow, or FCF, estimates.
Analyst Eric Heath noted he is positive on the company’s third quarter given stronger checks versus prior quarters, conservative guidance/estimates, and mixed investor sentiment. Channel partner results versus plan improved quarter-over-quarter and growth rates meaningfully improved, Heath added.
In addition, large deal activity in the quarter and in the pipeline sounds strong, according to the analyst. The company’s earnings is scheduled for May 20.
CrowdStrike (CRWD): KeyBanc noted that it is slightly cautious given a slight downtick in checks quarter-over-quarter, positive investor sentiment, and, likely, at least some competitive overhang from Palo’s platformization strategy and Palo’s announced acquisition of IBM’s QRadar’s SaaS Assets.
Heath noted that in their conversations with channel partners, they picked up on more instances of Falcon LogScale/SIEM traction, displacing Qradar and others. He also got feedback at RSA that almost all customers have migrated to the Falcon backend, which should bode well for further SIEM adoption.
As part of KeyBanc’s conversations on “platformizations,” the analyst did pick up on a few instances of Palo’s platformization deals which included endpoint and where CrowdStrike is the incumbent.
These instances will likely not impact CrowdStrike’s first quarter but may have an impact in the future as contracts come up for renewal, Heath noted. He maintained Overweight rating on the stock as he continues to see CrowdStrike well positioned with an extensive platform to compete head-to-head with Palo. However, Palo’s discounting strategy could pose a risk to pricing power or customer churn, and Palo’s acquisition of Qradar’s assets could limit SIEM displacement opportunities. CrowdStrike’s earnings is slated for June 4.
Zscaler (ZS): Heath said they see a relatively neutral setup given strong checks that improved quarter-over-quarter and negative investor sentiment, but still some caution on the implied fourth quarter billings ramp embedded in the FY24 guidance.
The analyst also picked up some incremental feedback that the company’s customers are potentially evaluating SASE alternatives — leaving KeyBanc incrementally cautious. However, the analyst does remain positive on ZS in longer term. Earnings expected on May 30.
MongoDB (MDB): The analyst sees a relatively neutral setup given positive usage trends and commentary from consumption peers Confluent (CFLT) and Datadog (DDOG), first quarter public cloud acceleration, stronger w/w consumption trends in in the foruth quarter of 2024 versus the same period a year ago, and potentially conservative non-Atlas estimates.
Atlas upside, however, may be narrower than FY24 beats, with the first quarter experiencing the most pronounced headwinds from the loss of unused Atlas commitments, according to the analyst.
Snowflake (SNOW): Heath said they are positive on the setup given positive usage trends and commentary from consumption peers Confluent (CFLT) and Datadog (DDOG), first quarter public cloud acceleration.
In addition, the company’s FY25 guidance appears more conservative, with management assuming similar usage trends to FY24, the analyst added. He expects management to remain prudent with FY25 guidance, with less visibility into the impact of iceberg on storage and the potential fiscal second half contribution from new products likely to GA around Snowflake Summit in June.
Investor sentiment is expected to improve more heading into Snowflake Summit in June, with several new products expected to be generally available, the analyst added.
The pace of AI-related announcements has accelerated since Sridhar Ramaswamy’s appointment as CEO, a positive change, with products like Cortex and Snowpark Container Services expected to become generally available soon, according to Heath. The company’s earnings expected on May 22.
Okta (OKTA): The analyst sees a positive setup given: solid checks; positive feedback from customers who were supportive of Okta following the recent breaches with no plans to churn; recent breaches such as UnitedHealth as a potential catalyst to identity spend; and conservative consensus cRPO estimates for FY25.
KeyBanc is also positive due to tailwinds from the Ping/ForgeRock merger; and new channel partnerships. The analyst remains Sector Weight as he waits for more clarity on the impact of the breach on new business and success of cross-selling CIAM, IGA, and PAM. Earnings slated for May 29.
SentinelOne (S): Heath sees a neutral setup due to mixed checks and an increasingly competitive endpoint market. However, he views investor expectations as low and the first quarter may have positive linearity if some deals from the fourth quarter were left for the first quarter as management indicated last quarter.
While SentinelOne may be more sheltered from Palo’s platformization strategy that is focused up market, the company may indirectly experience more competition down-market, according to the analyst. Meanwhile, Heath encouraged by recent product announcements from SentinelOne. Earnings scheduled for May 30.
Palo Alto Networks (PANW) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. The Seeking Alpha authors’ average rating is also Hold, but the average Wall Street analysts’ rating is more positive, with a Buy.
