Palo Alto Networks Should Benefit from the Cyber Security Boom

The cyber security market is projected to boom in the coming years, and while FireEye (FEYE) is my favourite pick from the sector, I think Palo Alto Networks (PANW) also represents good upside potential. Unlike FireEye, Palo Alto Networks is profitable and has been spending money wisely to grow its market share.

Another profitable quarter

For the fourth quarter, Palo Alto recorded earning per share of $0.28, $0.03 more than the consensus estimate of $0.25.

The company’s revenue for the quarter of $283.9 million was also ahead of the analysts’ estimate of $255.85. For the full year 2015, Palo Alto Networks observed prominent sales growth, prolonged operating margins and increased free cash flow generation. Throughout the year, the company’s client base expanded to 26,000 clients.

Nicely positioned

With the growing number of high-profile security breaches, the customer list will likely grow at a hectic pace in the coming years. Investors have taken a liking to Palo Alto due to the company’s smart R&D expenses.  Palo Alto’s SG&A as a percentage of revenue is a lot better than FireEye’s, which is why the company has managed to report consistent profits.

Recently, Palo Alto upgraded its next-generation security platform with new offerings and expanded its technology partnerships, and also received an “Outstanding” certification for “excellence across all substantial modes of technical support” from the Technology Services Industry Association.

Palo Alto’s robust performance clearly signifies that it’s natively unified, and automated security platform is extremely differentiated, and the company’s focus on innovation accounts for the strong hold of its strong position in the market.

Despite the fact that Palo Alto is budding its product portfolio to protect from cyber security apprehensions, a next-generation firewall platform is still core to the company’s mission. Nowadays, hackers are rapidly adopting the ways to breach security programs and with this, traditional firewall products have become out-dated. The company’s policy of focusing more severely on large-scale security applications should prove to be enormously money-making, as cybercriminals are intensively targeting large corporations.

One of the main reason that differentiate Palo Alto’s offerings from the company’s foes is the technique its firewall classify threats. The company replaced its outdated port-based traffic classification with App-ID, which recognises traffics grounded on a number of different mechanisms. So, as long one of Palo Alto’s customers reports a security breach, the stock looks good to hold for the long-term.


The cyber security market is projected to be valued at $170 billion by 2020, and Palo Alto is nicely positioned to benefit from this trend. The company’s smart spending, along with long-term profitability make it an ideal pick in the present market. Hence, I think it would be a wise decision to buy the stock.

Published on Oct 16, 2015
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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