BofA Lifts Cybersecurity Price Targets on AI-Driven Growth Outlook

Bank of America has raised its price targets for several leading cybersecurity companies, attributing the move to expanding sector valuations and a stronger long-term growth outlook driven by accelerating artificial intelligence adoption. In a research note, the bank's analysts said they expect sustained high revenue growth as AI increases digital complexity and security needs.

AI Adoption Fuels Sector Optimism

The core of BofA's thesis is that the proliferation of AI is increasing data volumes, expanding corporate attack surfaces, and making security systems more complex. This trend is expected to support durable spending across the cybersecurity sector, as leading platforms benefit from rising demand for protection and the growing value of their data and AI-based capabilities.

As a result, the brokerage expects the covered companies to sustain revenue growth of roughly 20% or more. To reflect these trends, the analysts increased their forward enterprise value-to-revenue and enterprise value-to-free-cash-flow multiples in their valuation models.

Revised Price Objectives

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BofA updated its price objectives for four key players in the industry, maintaining 'Buy' ratings on three of the stocks:

• Cloudflare (NET): Price objective lifted to $330 from $255, with a Buy rating retained. The bank highlighted the company's strategic position across AI inference and security.
• Palo Alto Networks (PANW): Target raised to $420 from $330, maintaining a Buy rating. Analysts see the company benefiting from platform consolidation and growing its share of enterprise security budgets.
• CrowdStrike (CRWD): Target increased to $230 from $187.50, though the stock's rating remains Neutral. BofA noted that the company's market leadership is already reflected in its premium valuation.
• SentinelOne (S): Price objective moved to $22 from $20, with a Buy rating reiterated. Its AI-driven platform is a key strength, though its valuation justifies a discount to larger peers due to its smaller scale.

Market Context and Risks

Despite the bullish outlook, the BofA analysts cautioned that the revised targets rely partly on continued multiple expansion across the cybersecurity sector. Investors should also consider risks such as slower-than-expected product adoption, weaker customer growth, rising competition, or a broader decline in market appetite for highly valued software companies.