Aside from an attractive valuation, Palo Alto (NASDAQ:PANW) stock has everything long-term investors should be looking for. Among Palo Alto’s favorable attributes are impressive financial results, excellent products, a proven leadership team, strong macro catalysts, and generally positive assessments by analysts.
Importantly, although the stock’s valuation isn’t attractive and would likely be viewed by some as excessive, it isn’t outrageous either. Given all of the company’s upbeat drivers and the fact that its valuation isn’t ridiculous, I advise long-term,, growth investors looking for an IT security play to buy the shares.
Palo Alto’s Financial Results, Products and Leadership
Over the years, Palo Alto has reported very strong financial results. Its revenue surged from $2.9 billion in fiscal 2019 to $4.26 billion in FY20 to $4.26 billion in FY21 to $4.86 billion over the 12 months that ended on Jan. 31. Meanwhile, the company’s cash flow from operations jumped from $1.035b billion in FY20 to $1.5 billion in FY21 and $1.675 billion during the 12 months that ended on Jan. 31.
As far as products, Louis Navalier, a veteran, highly successful investor, recently called Palo Alto”s offerings “robust” and “top-of-the-line.” Also offering high praise on this front was Seeking Alpha’s Cappuccino Finance. According to the columnist, Palo Alto’s “Cortex Extended Security Intelligence and Automation Management (XSIAM) will revolutionize security operations ” with its extremely fast response times.
Palo Alto’s CEO, Nikesh Arora, joined the company in 2018. He has a great resume, featuring a stint as COO of Softbank and a 10-year tenue at Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google. And, judging by Palo Alto’s financial results over the last several years, he’s done an excellent job as its leader.
Macro Catalysts and Analysts’ Assessments
In the wake of Russia’s invasion of Ukraine and Western countries’ decision to respond with unprecedented financial sanctions, many are worried that Russia will retaliate with cyberattacks on Western countries.
Additionally, on March 15, President Joe Biden signed a bill “requiring swift disclosure of all hacks and ransom payments,” Needham analyst Alex Henderson wrote, according to Investor’s Business Daily. The provision could cause IT security spending to meaningfully rise, the analyst believes. Finally, a number of analysts think that a new “network vulnerability” known as “Log4j” could boost the shares of IT security companies.
Most analysts who cover PANW stock appear to be upbeat on the shares.
As evidence of that, in February, three analysts had price targets on the shares of $620 or above. Today the stock is changing hands for less than $585.
PANW stock has a forward price-earnings ratio of 64. That’s rather high, although not very excessive. But given the stock’s many other positive attributes, I believe that it is a buy for long-term, growth investors.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
