Shares of Palo Alto Networks (PANW) plummeted 5.04% in Thursday's intraday trading session, as investors reacted to the company's announcement of a merger agreement with CyberArk Software Ltd. and subsequent analyst downgrades.

The cybersecurity giant revealed plans to acquire CyberArk Software Ltd., with CyberArk set to become a wholly owned subsidiary of Palo Alto Networks upon completion of the merger. While the boards of both companies have unanimously approved the deal, the market's initial response appears cautious. The merger agreement includes significant termination fees, with Palo Alto Networks potentially liable for a $1 billion fee if the deal falls through under certain circumstances.

Adding to the downward pressure, KeyBanc downgraded Palo Alto Networks from Overweight to Sector Weight following the merger announcement. Other analysts also adjusted their outlook, with Mizuho cutting its price target to $210 from $225, and D.A. Davidson lowering its target to $215 from $225. These actions suggest that while the long-term strategic value of the merger may be significant, short-term uncertainties are weighing on investor sentiment.