Palo Alto Networks (PANW) - Get Palo Alto Networks, Inc. Report is well-positioned heading into a strong spending environment, according to a Credit Suisse analyst, who upgraded the cybersecurity company to outperform from neutral and raised his price target to $425 from $385.
Shares of the Santa Clara, Calif., company at last check climbed 7.4% to $388.
Analyst Brad Zelnick said in a note to investors that he was upgrading Palo Alto Networks "as we see the company well positioned heading into [what will be] a strong spending environment in 2021."
"In 2021, we see the enduring changes in how people work and a significantly elevated threat environment driving accelerating cybersecurity spending," Zelnick said.
The analyst said the strong demand would be driven by increased spending in Zero Trust and Secure Access Service Edge
Zero Trust requires all users to be continuously identified, authenticated and authorized whether they are inside or outside of a corporate network. SASE is an architecture that enables zero trust.
The coronavirus pandemic created an enduring distributed workforce, the analyst said. That in turn creates "greater distributed application access, which broadens attack surfaces."
Zelnick also expects a near-term step up in incident response, managed services and threat hunting. Organizations will look to known vendors to scrub IT estates for potential vulnerabilities related to the Sunburst cyberattack. And multiple spending cycles will converge.
"Ultimately, we see PANW as well positioned to leverage its strong brand, large installed base, and relatively broad [next-generation] security portfolio to capture incremental wallet share," Zelnick said.
"While we temper our expectations for a significant ramp in U.S. federal spending in the near term, it is clear cybersecurity is a top priority of the new administration."
The analyst expects Palo Alto Networks to benefit from the Joe Biden administration's focus given its incumbency position; and recent authorizations in the Federal Risk and Authorization Management Program.
TheStreet.com founder Jim Cramer said Tuesday the company is "a winner."
"When the facts change, you have to change, too," Cramer said, referring to his Action Alerts PLUS portfolio closing out their position in Palo Alto. "We should have gone back when it was clear that the strategy changed."