Morningstar called AVGO one of its top tech picks, forecasting nearly $200 billion in AI revenue by fiscal 2028.
- Morningstar lifted PANW's fair value to $285, citing AI-driven firewall demand, but maintained a '3-star' rating.
- The firm also raised CRWD's fair value to $530 on confidence in its AI strategy, but kept a '2-star' rating,
- AVGO beat earnings and revenue estimates and guided above expectations, yet shares fell more than 12% as investors sought even stronger AI guidance.
Palo Alto Networks (PANW), CrowdStrike (CRWD), and Broadcom (AVGO) all delivered strong quarterly results recently, but Morningstar believes Wall Street may have gotten one earnings reaction wrong. The research firm says Broadcom's post-earnings decline has created the most attractive opportunity of the group.
In premarket trading, AVGO rose 1%, CRWD gained 0.2%, while PANW slipped 0.3%. Meanwhile, the Direxion Daily Semiconductor Bear 3X Shares ETF (SOXS), which seeks to deliver 3x the inverse daily performance of the semiconductor Index, fell 6%.
PANW Sees Firewall Tailwinds
Palo Alto Networks reported third-quarter (Q3) adjusted earnings of $0.85 per share, beating estimates of $0.80, while revenue of $3 billion topped expectations of $2.94 billion. The company also raised its full-year earnings and revenue guidance. Remaining performance obligations rose 36% from the previous year to $18.4 billion, while security annual recurring revenue jumped 60% to $8.1 billion.
CEO Nikesh Arora called the quarter a "standout quarter," citing accelerating growth in bookings as customers secure AI deployments. In a fresh note from late Monday, Morningstar raised its fair value estimate for PANW to $285, driven by stronger growth expectations for Palo Alto's firewall business. Analyst Dave Sekera said demand for firewall security products should benefit from ongoing AI data center buildouts. Despite the strong outlook, Morningstar rates the stock '3-star,' noting that shares trade only slightly below fair value after gaining 50% this year.
CRWD's AI Strategy Wins Praise
CrowdStrike also topped expectations, reporting adjusted earnings of $1.10 per share versus estimates of $1.07, while revenue of $1.39 billion beat forecasts of $1.36 billion. The company raised both its fiscal 2027 revenue and earnings outlook.
Morningstar raised its fair value estimate to $530, citing growing confidence in CrowdStrike's AI-driven growth strategy. Sekera highlighted the company's AI detection and response business, where annual recurring revenue grew more than 250% from a quarter ago. Even after the increase, Morningstar gave CrowdStrike a '2-star' rating, saying the stock still trades too far above its long-term intrinsic value.
AVGO Emerges As Top Pick
Broadcom beat estimates with adjusted earnings of $2.44 per share on revenue of $22.2 billion, ahead of forecasts of $2.40 and $22.1 billion, respectively. The company also guided for third-quarter revenue of $29.4 billion, above Wall Street expectations. However, the stock fell more than 12% after earnings.
According to Morningstar, the market reaction was due to elevated expectations and not weak results. "Good enough isn't good enough," Sekera said, arguing that investors wanted the company to keep raising AI guidance despite already strong forecasts.
Morningstar believes Broadcom's outlook may actually be conservative. While the company discussed AI revenue exceeding $100 billion in fiscal 2027, the firm expects even stronger growth and is modeling nearly $200 billion in AI revenue by fiscal 2028. Sekera said Morningstar has "high visibility" into its growth based on expected AI infrastructure spending and accelerator deployments by customers such as OpenAI and Anthropic.
"It is one of our top picks in the tech team's list," Sekera said, forecasting 40% annual revenue growth and 46% earnings growth over the next five years. The firm assigned the stock a '4-star' rating and estimated that it trades at a 37% discount to fair value.
How Do Retail Traders Feel About PANW, CRWD, AVGO?
On Stocktwits, retail sentiment was 'extremely bullish' for AVGO, 'bullish' for CRWD and 'neutral' for PANW, with all three seeing 'extremely high' message volume.
Over the past year, AVGO has led the group with a 62% gain, followed by CRWD at 41% and PANW at 33%.
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