Palo Alto Networks (NASDAQ: PANW) is one of the big names in next-generation cybersecurity for enterprise networks and governments. It has operations around the world.
Given the heat of the trade war, its wide international presence might not be a great thing for PANW stock, since it is likely to lose business in China for the time being.
But here’s a fact that was recently released by IBM’s (NYSE:IBM) cyber analysis team: malware attacks are up 200% in 2019. There’s also a report from the United Nations of estimates that North Korea has hacked around $2 billion from financial institutions and cryptocurrency exchanges. It then used its hackers to launder that money to avoid international sanctions.
Add to that the fact that we are almost certain Russia, as well as other nations, are actively involved in disrupting U.S. elections again. That also goes for elections around the globe.
The point is, there are plenty of threats out there. And that means there’s an even greater need for large organizations and governments to harden their security.
Increased Security Measures Good for PANW Stock
The U.S. isn’t sitting on its hands, not taking offensive measures of its own. Data has made nuclear bombs irrelevant. It’s easier to blow up a country (or erode it) manipulating data than it is to drop a bomb on it.
This is where Palo Alto Networks thrives.
Certainly, a weaker renminbi will mean that revenue coming out of China for U.S. companies will be hurt. But there is plenty of business outside China that PANW can find.
Both PANW’s fiscal second-quarter (reported in late February) and third quarter (reported in late May) came in well above expectations. In Q3 for example, its target revenue range was $697 million to $707 million. PANW came in at nearly $728 million.
The only problem that many cybersecurity companies have is that they have lowered guidance for the rest of the year. This is where the trade war has hit them, as well as Brexit.
All their overseas revenue loses value when the dollar is strong because they earn money in a foreign currency that is then converted to dollars for reporting purposes. And this turmoil in Europe and with China may continue to hurt.
Bottom Line on PANW Stock
But that doesn’t mean its business is weaker. As a matter of fact, PANW is expecting at least 20% growth over last year and has made three significant purchases for over a $1 billion in the past year to expand its platforms.
While the rest of this year may be slower than how it started, cybersecurity is not a sector that is going to feel that tightened spending. As a matter of fact, this is when many firms and governments ratchet up spending to avoid being vulnerable to hacks when its important to protect what you have.
My Portfolio Grader gives PANW stock a B rating here, given the uncertainty of what’s to come through the end of this year. But for patient investors, it’s a pretty good deal.
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.