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Palo Alto Downgraded, As Cloud Computing Delays Security Upgrades

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Corporate America's shift to cloud computing will delay an upgrade in cyber-security technology and hit firewall provider Palo Alto Networks ( PANW ), says Goldman Sachs.

[ibd-display-video id=3097770 width=50 float=left autostart=true] Gabriela Borges, a Goldman Sachs analyst, downgraded Palo Alto Networks to neutral from buy. Borges lowered her price target to 168 from 171. Palo Alto Networks fell 2.1% to close at 153.87 on the stock market today .

Palo Alto Networks competes in the corporate security firewall market vs. Cisco Systems ( CSCO ), Check Point Software Technologies ( CHKP ) and Fortinet ( FTNT ). Firewalls block unauthorized traffic from entering a private network and monitor web-based apps.

As large companies shift computing workloads from private data centers to the likes of Amazon Web Services, part of Amazon.com ( AMZN ), they're reassessing what security technology they need.

"We do not expect a material industry refresh cycle until 2019, and we expect the move to public cloud to pressure industry growth rates," Borges said in a note to clients. "Virtual (software) firewall adoption for public cloud workloads has lagged and we believe many customers to date are choosing not to use a firewall vendor (virtual or physical) to secure their cloud-hosted workloads."

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Security vendors typically sell stand-alone "appliances" that house software, electronics and network tools. Analysts expect more security companies to offer software-only, or "virtualized" versions of products sold through AWS or Microsoft (MSFT).

"A focus on hybrid computing environments should drive relatively stable medium-term trends, and we look for whether Palo Alto can drive increased revenue with its cloud portfolio over time," added Borges.

Fortinet slipped 0.3% to finish at 45.85 Monday. Cisco had been down but ended the day 0.9% higher to 41.66. Check Point added 0.5% to 105.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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