Morgan Stanley analysts see a positive setup for Palo Alto Networks (NASDAQ:PANW) into the company’s upcoming earnings release next week.

The analysts reiterated an Overweight rating and $255 price target on the stock in their note Thursday, stating the firm’s checks are solid into low expectations.

“Our FQ3 checks have been largely positive with the vast majority of PANW partners in line or above plan and a competitive positioning that continues to get stronger,” the analysts wrote. “Demand for vendor consolidation in security is higher than ever and PANW is a leading beneficiary.”

Morgan Stanley believes investors are slightly more cautious chasing the stock into the FQ3 print due to a YoY billings comp that’s 10pts tougher vs last quarter and a tougher macro and longer sales cycles. However, “this creates a more favorable setup,” in their view.

“Once past the FQ3 hump, we see multiple positive catalysts over the next couple quarters, including:

1) S&P 500 inclusion likely in early summer;

2) a more favorable estimates setup in FQ4;

3) an Analyst Day likely this fall with new 3-year target for FY26,” concluded the analysts.