Another day, another hack. In other words, another day, another reason to buy Palo Alto Networks Inc (NASDAQ:PANW) stock. Every time I read a headline about yet another data breach, I interpret it as yet another reason to load up on PANW stock. It seems that I have been reading a lot of these headlines recently.
The most recent victim? Whole Foods Market, Inc. (NASDAQ:WFM). In a not so unfamiliar breach, hackers targeted point-of-sale systems (the machines where consumers swipe their credit cards) at select Whole Foods locations to steal credit card information.
Of course, all of this is against the backdrop of the Equifax Inc. (NYSE:EFX) data breach, a cyber-attack of unprecedented scale wherein 143 million Americans’ personal information was compromised. These attacks also follow headline hacks during the U.S. Presidential Election, the WannaCry attack in May, and the Petya attack in June.
So the saying really does seem fitting: another day, another hack.
Lets add the third component: another day, another hack, another reason to buy PANW stock.
Lets take a deeper look to understand why this connection makes so much sense.
Back To Its Winning Ways
Palo Alto Networks is a leader in the cyber-security market. In fact, many view PANW as the poster child for the cyber-security market.
When this market was coming into its own from late 2013 to late 2015, PANW stock could do no wrong. Beat-and-raise quarters were the norm. Analysts praised the stock. Investors bought it up. PANW was an undisputed winner.
But that growth narrative hit a sang in mid-2016 when PANW reported slowing growth and stumbling earnings. Over the next several quarters, the robust cyber-security growth narrative started to cool, and PANW failed to repeat on its early success. Beat-and-raise quarters didn’t happen. Earnings came in mostly in line with expectations. Revenues missed a few times in late 2016 and early 2017. Guides were weak.
PANW stock got hit. Big time. It fell from about $190 in December 2015 to $110 to April 2017.
But since then, its back up to about $145. The big catalyst? Consecutive beat-and-raise quarters in May and August. At the same time, the cyber-security growth narrative is starting to make a comeback because of the frequency of headline-grabbing hacks like the ones at Equifax, Whole Foods, Wendy’s, Chipotle, and others.
Thus, at the same time PANW stock is starting to get its “mojo” back, the cyber-security growth narrative is starting to heat up again. That is a powerful combination that implies robust gains for PANW stock in the future. This current run, which started in May 2017, could look a lot like the run PANW stock had from late 2013 to late 2015.
Bottom Line on PANW Stock
It helps that in this time of distress for a lot of companies as a result of data breaches, Palo Alto Networks has a solid game-plan for turning that distress into increased business.
According to Palo Alto Networks CEO Mark McLaughlin, who recently sat down with CNBC’s Jim Cramer: “…we don’t chase the ambulance. Nobody in companies appreciates that… After the fire is out and you’re thinking about the architectural design for the future, that’s where we get to come into play.”
So the company isn’t running around and shouting “we told you so.” No one likes a brat. But everyone likes a teammate. This patience and diplomacy will eventually result in huge gains for PANW’s business.
As for the stock, I’m sticking with my call that it hits $200 in 12 months.
As of this writing, Luke Lango was long PANW and EFX.