Based in Santa Clara, California, Palo Alto Networks, Inc. (PANW) is a global cybersecurity solutions provider. The company is playing an important role in shaping the cloud-centric future, with its security solutions transforming the way people and organizations secure their data. Its platform includes Next-Generation Firewall, which delivers application, user and content visibility and control, and protection against network-based cyber threats. It also offers Threat Intelligence Cloud that provides central intelligence capabilities, as well as automated delivery of preventative measures against cyber-attacks.

The company delivers its solutions in three fundamental areas — Secure the Enterprise, Secure the Cloud, and Secure the Future. PANW has been recognized as a leader in The Forrester Wave: Enterprise Firewalls Q3’20, and The Forrester Wave™: Zero Trust eXtended Ecosystem Platform Providers, Q3 2020. With growing demand for its products, the company has been excelling, with significant product enhancements across its portfolio. The company’s Prisma Cloud now boasts 70% of the Fortune 100 companies as users.

Over the past year, the stock rallied 57.7% to close yesterday’s trading session at $364.82, after hitting its all-time high of $375. Continued innovation, industry recognition, and market success have helped the stock earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates PANW:

Trade Grade: A

PANW is currently trading significantly above its 50-day and 200-day moving averages of $292.01 and $256.41, respectively, indicating an uptrend. Moreover, PANW has gained 23.2% over the past month, reflecting a solid short-term bullishness.

For the quarter ended October 2020, PANW’s revenue has increased 22.6% year-over-year to $946 million primarily driven by the growth in billings. Its billings have increased 20.7% year-over-year to $1.1 billion. Non-GAAP net income increased 50.9% year-over-year to $158.1 million, and its non-GAAP EPS increased 54.3% year-over-year to $1.62.

The company launched a rapid response program on December 17 to help SolarWinds Corporation’s (SWI) Orion customers navigate risks from cyberattacks. As part of the program, PANW is offering SolarStorm rapid assessment, and SolarStorm cybersecure engagement. On December 15, PANW completed its acquisition of Expanse Inc., which is a leader in attack surface management.

The company introduced the industry’s first 5G-native security offering on November 18. This offering enables service providers and enterprises to turn 5G networks into highly secure networks. On November 10, PANW introduced its Enterprise Data Loss Prevention (DLP), a cloud-based service. The company announced an expanded partnership with PwC in October, which will deliver managed detection and response (MDR) services to joint customers.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, PANW is well positioned. The stock is currently trading 2.7% below its 52-week high of $375.

The company’s net revenue has grown at a CAGR of 24.3% over the past three years. With product enhancements, PANW has been developing solutions to protect its customers from fast-evolving cyber-attacks. Gartner has named PANW as a leader in the Magic Quadrant for Network Firewalls for the ninth consecutive time.

Peer Grade: A

PANW is currently ranked #1 of 24 stocks in the Software – Security industry. Other popular stocks in the software – security group are Fortinet, Inc. (FTNT), Check Point Software Technologies Ltd. (CHKP), and NortonLifeLock Inc. (NLOK).

With a 57.7% gain, PANW has comfortably beaten the returns of these popular industry participants over the past year. While FTNT and CHKP have gained 39.3% and 20.7%, respectively, over the same period, NLOK has lost 18.5%.

Industry Rank: A

The Software – Security industry is ranked #72 of the 123 StockNews.com industries. The companies in this industry provide cybersecurity solutions for detecting, preventing, and resolving cyber-attacks.

Data breaches are a huge and growing problem worldwide. As some big organizations are also falling prey to the cyber-attacks, the demand for this industry’s solutions has gone up markedly. As many companies are expected to continue remote working practices even after COVID-19 is vanquished, this industry, we believe, should gain in the near term as companies will seek to protect their databases and systems.

Overall POWR Rating: A (Strong Buy)

PANW is rated “Strong Buy” due to its short- and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

With growing demand for advanced security features to prevent cyber-attacks, PANW has the potential to soar in the coming months despite gaining 57.8% so far this year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.

The consensus revenue estimate of $4.12 billion for 2021 indicates 20.8% increase year-over-year. Moreover, PANW has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to grow at 18.4% in 2021.

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PANW shares were trading at $363.78 per share on Thursday morning, down $1.04 (-0.29%). Year-to-date, PANW has gained 57.31%, versus a 16.43% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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