Palo Alto Networks (PANW) builds comprehensive, AI-enhanced security platforms to protect enterprise-wide networks for 85,000 customers globally, explains Adam Johnson, long-term, growth stock specialist and editor of Bullseye Brief.
Working from home is no longer a Covid thing. It’s an emerging component of our New Normal, made possible by an evolving balance between cloud-deployed computation and AI-enhanced security protocols.
No longer can companies simply firewall legacy systems in-house, they have to project power abroad, the modern equivalent of sending battleships thousands of miles over the horizon. Palo Alto is the top-ranked, fastest growing and largest network security provider in the world.
Israeli-American engineer Nir Zuk — formerly of CheckPoint (CHKP) — founded the company in 2005 to enable interoperability of multiple applications within a secure environment, an important innovation for the industry and key reason why Palo Alto has grown so quickly.
Rather than simply restricting access and siloing specific tasks, as had been the standard approach, Palo Alto distinguishes itself by creating protocols which enable secure connection between all trusted parties across unlimited operating applications.
The company has beaten earnings estimates every quarter since going public in 2012 (by 9.85% on average), and this year earnings are tracking +25%.
As a well-established high-growth company, Palo Alto has always traded at a premium to the market, with a forward P/E ratio averaging 54x very consistently over the past decade… currently it trades at 58x. Applying the 54x multiple to 2025 consensus eps of $13.20, I arrive at a price target of $715.
This is very straightforward, and quite possibly even conservative given industry trends and PANW’s dominance. Given the company’s leadership position, steady growth trajectory and peer’s considerably higher valuation multiples, I think this target could prove conservative.
