Is It Time to Be Bearish on Palo Alto Networks? 

Cyber security stocks are usually very volatile and the recent earnings miss by FireEye (FEYE) has put further downward pressure on the entire sector. However, I think the recent pullback can be seen as an opportunity. The cyber security market is growing at a rapid pace and despite the high valuation of stocks in the sector, I think the recent pullback is an opportunity for long-term investors.

Palo Alto Networks (PANW) is trading about 30% lower than its 52-week high levels and after the recent pullback, I think the stock is a buy.
I have compared many cyber security stocks in the past and in this article, I will compare Palo Alto Networks with Check Point.

Palo Alto Network vs. Check Point

The cyber security sector is getting increasingly competitive. However, with the worldwide cloud data-security market projected to touch approximately $9 billion by 2020, there is sufficient amount of room left for minor companies also. After considering this, Palo Alto Networks and its foremost rival – Check Point (CHKP), are both focused on intensifying their own data security reach.

Both the companies are moving on different paths to achieve their target, but Palo Alto Networks seems to be a better pick as compared to Check Point. In the most recent quarter, Palo Alto Network’s top-line surged approximately 55 percent to $334.7 million.

Apart from this, the most significant thing is that the company delivered the seventh consecutive quarter of more than 50 percent sales growth. According to Palo Alto Network’s upcoming quarter revenue forecast of $335-$339 million, the 50 percent-plus sales trend will likely end as it is equal to just 45 percent progress. Palo Alto Networks has also prolonged its security offering grounded on the cloud, and claims an approximately 50-50 split amid its product and service revenues.

On the other side, Check Point also delivered strong quarterly results similar to that of Palo Alto Networks. In the last quarter, Check Point’s GAAP EPS surged around 10 percent to $0.095. The company also introduced new highly efficient data center security products in the prior quarter. Apart from this, Check Point has extended its association with the Internet of Things, cloud, and security beast IBM in the previous quarter.

This prolonged agreement with IBM comprises sharing security data and further partnership to guard against cyber crime. But this can also create problems for Check Point as premeditated alliances do not end in profitable relationships every time. However, locating itself together with an industry frontrunner such as IBM could turn into a prodigious resource for Check Point to improve both the company’s reach and offerings.


Palo Alto Networks, after the pullback, looks very attractive. Despite the growing competition, Palo Alto Networks’ moat is strong and I expect the company to continue dominating the cyber security market.
Published on May 13, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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