Is the party over for cybersecurity stocks? Investors might think so after news that Peter Weed from Sanford Bernstein downgraded three cybersecurity stocks. He downgraded Palo Alto Networks (NASDAQ: PANW) from Outperform to Market Perform; the same applied to Okta Inc. (NASDAQ: OKTA) and SentinelOne (NYSE: S).
Interestingly, Weed raised his price target on all three stocks despite the downgrades. SentinelOne was the only one whose new target exceeded the consensus. That distinction matters because Palo Alto, Okta, and SentinelOne are all trading near their respective consensus price targets.
The entire cybersecurity sector sold off sharply early in the year as investors worried that the AI bubble would burst. Recent earnings reports have helped ease those concerns. Now, the focus has shifted toward the risks created by AI agents, which could require more aggressive cybersecurity measures.
That's led many analysts to raise their price targets since the sector reported quarterly earnings. That's a bullish sign for investors hoping for further upside in a sector that's had a strong run in 2026.
PANW Stock Near Its Price Target as ARR Growth Cools
Palo Alto Networks is one of the largest and most recognized names in the cybersecurity sector. PANW is up over 111% in 2026 and just delivered a strong fourth-quarter fiscal year 2026 (FY2026) earnings report.
The company cited record execution, which is accelerating momentum for its platformization model. It also reported strong AI-related demand.
The concern is margin pressure. Palo Alto still anticipates significant growth next year, but next-generation security annual recurring revenue (NGS ARR) growth is expected to moderate to between 22% and 23% in FY2027 from 63% in FY2026.
That could be what Weed was anticipating by putting a price target of $351 on PANW. That's a 38% increase from his former price target of $253, but it's approximately 10% below the consensus price target of $390.47, which is just about where the stock trades as of this writing.
It's also worth noting that Weed isn't alone in tapping the brakes on PANW. According to MarketBeat data, Citigroup, Scotiabank, and Phillip Securities also downgraded the stock in early September. The number of analysts with a Hold rating on PANW has doubled from six to 12 in the past month. Still, 38 of the 50 analysts covering the stock rate it a Buy, with an overall Moderate Buy consensus rating.
OKTA Stock Rally Leaves Little Room Below Analyst Targets
Okta has outperformed Palo Alto in 2026. The stock is up more than 131% for the year, driven by its strong niche in zero-trust security. The company's platform would seem to be tailor-made for a future with AI agents. That was supported by the company's Q2 earnings report for FY2027, in which Okta reported growing demand for its AI-agent security products. However, management said that AI revenue will be immaterial to FY2027.
That may explain why Weed is bearish on OKTA. The stock trades near its consensus price target of 199.56. He gives OKTA a target of $174. That's up from $143, but it's still nearly 13% below the consensus target.
Unlike PANW, Weed is a contrarian to overall sentiment. Since his downgrade, more than a dozen analysts have raised their price targets on OKTA, and Jefferies, KeyCorp, Evercore, and Stephens now share a Street-high target of $240. MarketBeat data shows 33 of the 43 analysts covering Okta rate it a Buy or better.
Free cash flow may be an area to watch. It's been growing at an accelerated pace in the last three years. If that trend continues, the stock may be significantly undervalued at current levels. But if that normalizes, Weed may have the call right.
Why Bernstein's SentinelOne Price Target Beats the Consensus
SentinelOne is the smallest of the companies in this group, with a market cap of just over $7.9 billion. SentinelOne overlaps with Okta in identity threat detection, but its core business is endpoint security. In that regard, it's closer in scope to Palo Alto and CrowdStrike (NASDAQ: CRWD).
The stock is up more than 51% in 2026 and is trading about 3.5% below its consensus price target of $23.64. SentinelOne reported strong revenue and earnings per share (EPS) growth in its latest Q2 earnings report for FY2027. However, spending on AI products, go-to-market efforts, and partner channels is expected to moderate margin expansion in the coming quarters.
Weed set S's stock price target at $25. That's up from $21 and about 5.8% above the consensus price target of $23.64. But it's well below the Street-high $28 targets from Susquehanna and Guggenheim. SentinelOne has the most divided coverage of the three, with 16 Buy ratings, 12 Holds, and one Sell among the 29 analysts tracked by MarketBeat.
The article "Bernstein Downgrades 3 Cybersecurity Stocks: How Concerned Should Investors Be?" first appeared on MarketBeat.
