When Palo Alto Networks (NASDAQ:PANW) releases earnings the following week, Morgan Stanley analysts anticipate a favourable setup.

In their note Thursday, the analysts reiterated an Overweight rating and $255 price target on the stock, stating the firm’s checks are solid into low expectations.

“Our FQ3 checks have been largely positive, with the vast majority of PANW partners in line or above plan and a competitive positioning that continues to get stronger,” noted the analysts. “Demand for vendor consolidation in security is higher than ever, and PANW is a leading beneficiary.”

Morgan Stanley feels that due to a YoY billings comp that is 10 points harder than last quarter, a tougher environment, and lengthier sales cycles, investors are becoming more cautious as they chase the stock into the FQ3 print. They believe that “this creates a more favourable setup,” nonetheless.

“Once past the FQ3 hump, we see multiple positive catalysts over the next couple quarters, including: 1) S&P 500 inclusion likely in early summer; 2) a more favourable estimates setup in FQ4; and 3) an Analyst Day likely this fall with new 3-year target for FY26,” the analysts wrote in their conclusion.