Investing.com -- HSBC upgraded Palo Alto Networks (NASDAQ:PANW) to “Hold” from “Reduce,” citing resilient cybersecurity demand in the face of macroeconomic uncertainty and a valuation that is no longer stretched.

The brokerage said it views cybersecurity as “recession resilient,” noting that spending on security tends to hold up even during economic slowdowns.

Past evidence indicates that revenue growth at key cybersecurity firms is not materially impacted by changes in economic growth, HSBC analyst wrote in a note.

Shares of Palo Alto have fallen amid broader market concerns that U.S. tariffs could weigh on global economies.

However, HSBC said geopolitical tensions, particularly deteriorating U.S.-China relations, could increase perceived cyber risks and support security budgets.

More than 60% of Palo Alto’s revenue over the next 12 months is backed by existing contracts, HSBC estimates, helping to reduce volatility.

Security spending is often viewed as a must-have technology, the analysts said.

HSBC left its earnings estimates and $156 target price unchanged.

The stock currently trades at 48.7 times estimated CY25 non-GAAP earnings, versus a sector median of 26.2 times. HSBC sees PANW’s EPS growing at a 20.1% CAGR through 2027, well above most tech peers.

Despite the upgrade, HSBC maintained Fortinet (NASDAQ:FTNT) as its preferred cybersecurity pick, citing stronger earnings growth and a more compelling valuation.

“While it manufactures most of its hardware in Taiwan, the company gets more than 70% of its billings from outside of the US; hence, it is somewhat cushioned from the US-led tariff war,” analyst at HSBC added.

HSBC’s target price for Palo Alto implies a 9.8% downside from current levels.

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