Palo Alto Networks (NYSE:PANW) was quite a story when it hit the markets a little over six years ago. By the time its first year was over, PANW stock was on its way. Since its IPO, it’s up more than 260%, or more than 45% a year for more than half a decade.
But 2018 was a tough year for PANW for a couple of reasons.
First, it got caught up in the big tech selloff. That wasn’t something it could control, but that didn’t really matter. It happened all the same.
However, in the past 12 months the stock is up 27%, so it wasn’t a disaster. And sales of upgrades for its current product line was up 30%. The numbers were solid, but there has been concern in the sector that a slowing economy may hamper enterprises’ desire to prioritize cybersecurity in their budgets.
Leadership Changes for PANW Stock
Second and more specific to PANW is the shift in leadership in the company and what’s in store for the future of the company.
Last year, PANW got a new CEO in Nikesh Arora, a former executive at Japanese tech conglomerate SoftBank. Later in the year, Amit Singh was brought on board as president. He is a former VP of business and operations in emerging computing platforms at Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
First, analysts were concerned that neither of these two leaders had strong cybersecurity backgrounds. And then there was the issue with shareholders voicing their disdain for the $125 million pay package offered to Arora for a mere 39 business days of work in 2018.
There was also some concern that Arora’s pay package is built around PANW stock price, and that meant there may be significant M&A activity to spike the potential value of shares.
But Arora and his management team have been reaching out to large shareholders and analysts to explain what their real plans are. This has helped calm some of the consternation that was showing up in PANW’s stock price.
There was also concern that PANW was going to have to enter the cloud security market after significantly disrupting the firewall enterprise market. This transition is another point of concern for analysts.
However, PANW has already spent $500 million in the sector to beef up its offerings, so this is more a matter of executing than it is buying more cloud security assets.
But a similar sized competitor — Fortinet (NASDAQ:FTNT) — is also going through the same transition. What’s more, Palo Alto is also looking to move into the telecom sector, where FTNT is already positioned. Any market share PANW stock can get is a win for the company.
As for the M&A concerns, Palo Alto leadership has said it’s not looking for blockbuster deals, but rather small deals that will help it transition into the new markets it wants to enter.
Ultimately this is more a pivot than a restructuring of the company, and the new leadership has a new skill set as well as holding onto the core cybersecurity talent it has built over the years.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.