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."
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.