Palo Alto Networks (PANW) makes a strong case for artificial intelligence acting as a positive driver of overall cybersecurity demand, Morgan Stanley said in a Wednesday note.

AI will result in a trend of consistency and harmonization of data in enterprises, as they seek more control with more critical functionality placed into AI agents and infrastructure, Morgan Stanley analysts cited Palo Alto as saying. Further, the company noted that large language model providers will find it challenging to provide comprehensive security, the analysts said.

Palo Alto continues to benefit from long-term industry trends of consolidation into platforms, the growing presence of hyperscalers, and the impact of AI, the analysts said. The company's fiscal Q2 net new annual recurring revenue and services fell short of consensus expectations, but the post-earnings drop in stock price misses the big picture, the analysts said. They added that the stock presents an "attractive opportunity" for investors.

Morgan Stanley kept the company's stock rating at overweight and reduced the price target to $223 from $245.

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