Palo Alto Networks Stock Forecast: Palo Alto Networks [NYSE: PANW] is a cybersecurity company that offers cutting edge firewall technology to allow users to run whatever applications they choose while protecting their computers and network from data leaks and hacker attacks. It is headquartered in Santa Clarita, California and serves businesses worldwide.
This company uses patented technology to both enable applications regardless of the port they use and scan networks in real time for viruses, malware, and other threats. In contrast, many other companies offer firewalls that block threats on specific ports, leaving them open to targeted attacks that utilize port-hopping or focus on ports that are not commonly used.
Palo Alto Networks Cybersecurity Leader
Palo Alto Networks [NYSE: PANW] has positioned itself among the leaders in cybersecurity by offering unique features on its firewalls such as:
- The ability to classify traffic based on the identity of the application generating that traffic rather than on the activity on certain ports.
- Real-time content scanning for viruses and malware
- The use of a virtual cloud network to identify malicious files used in targeted attacks
- Graphic visualization of network applications that allows users to categorize data by threats, time, ports, and other categories of interest.
- The ability to identify, control, and inspect SSL encrypted traffic and applications.
Although it is mostly known for its next-generation firewalls, Palo Alto Networks has been consistently expanding since 2007 and offers a variety of other cybersecurity products, including Wildfire malware prevention software and Trap endpoint protection.
In 2018, it began offering Application Framework, a cloud-based service that allows clients to upload security applications that are instantly distributed to customers.
In addition to offering cybersecurity products, Palo Alto Networks is the founder of the Cyber Threat Alliance. This is a non-profit organization whose goal is to reduce threats to cybersecurity by sharing information with its members.
Palo Alto Networks debuted in 2005 and began offering stock on the New York Stock Exchange on July 20, 2012. Its initial public offering was the fourth largest IPO of 2012, raising $260 million for the company. It reported revenue of $2.27 billion for 2018.
Is Palo Alto Networks A Buy?
Palo Alto Networks stock prices have been falling. The stock lost 11.28% over the month of August alone. However, these may be short-term losses, as the company is expected to show year-over-year growth of 10.94% at its next earnings release in early September.
In addition, Palo Alto Networks [NYSE: PANW] outperformed expectations during the last quarter, producing earnings of $1.31 per share rather than $1.25 per share as predicted. This represents earnings of 4.80% over expectations.
This is not the first time Palo Alto Networks has outperformed expectations, as the stock has consistently produced larger earnings per share than expected over the last four quarters.
Investors who are interested in Palo Alto Networks stock may want to buy while the prices are falling, as stock prices are comparatively low and may rise in the long-term.
If the stock rises, investors could make money on this stock. However, the downward trend signals a slower rising rate and suggests this stock doesn’t have much momentum. Thus, investors must be willing to hold onto the stock in the long-term and wait out current falling patterns to make money with this stock.
What Are The Risks of Buying Palo Alto Networks?
Buying a stock like Palo Alto Networks [NYSE: PANW] that has been consistently falling always carries the risk that the stock will continue to lose value.
Although the earnings report is expected to show year-over-year growth, there is a risk that Palo Alto Networks will underperform expectations. If this happens, the stock prices may fall further after the release of the report.
There are several factors that suggest that this stock may be a riskier investment.
- Its PEG rate of 1.35 suggests that the stock is overvalued relative to its growth.
- Palo Alto Networks’ stock has an average volatility of 2.23%. Highly volatile stocks may be more likely to lose money in the short-term as they whipsaw up and down.
In addition, the most recent AAII Bull/Bear Ratio in August showed a spread of -26.54, suggesting that investors expect the market to be bearish in general, and there are few indications, if any, that Palo Alto Networks will defy general market trends.
However, the risk is mitigated by resistance on the bottom of the trend. The bottom is currently $199.26; if the stock falls back to this price, investors will likely be able to sell before they incur further losses.
Palo Alto Networks Stock Forecast Summary
Palo Alto Networks stock is falling in value and expected to continue to do so in the short-term.
Its PEG ratio is of significant concern, suggesting that the stock is overvalued relative to its growth, and the stock is highly volatile.
Fluctuations in price over time also suggest the stock lacks momentum. However, Palo Alto Networks stock has consistently outperformed expected earnings over the past four quarters and the stock has strong growth metrics.
Palo Alto Networks [NYSE: PANW] is a stock with strong growth potential even though it has problems that suggest it is not going to be a strong earning stock in the fourth quarter of 2019.
Investors should watch this stock carefully before deciding whether or not to invest, as its lack of momentum and overvaluation puts it at risk of continuing to drop in value despite its potential for growth.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.