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Palo Alto: Firewalls, Cyber and AI

10/21/2019 5:00 am EST

Focus: TECHNOLOGY

Hilary Kramer

Editor, GameChanger Stocks

International cybersecurity company Palo Alto Networks (PANW) was founded in 2005 by Nir Zuk, who was a developer of the first network firewall and intrusion prevention system, notes growth stock expert Hilary Kramer, editor of GameChangers.

The company had its IPO in 2012, and since then has enjoyed significant growth since companies were willing to spend to thwart more and increasingly sophisticated cyberattacks and the company provided superior technology to meet these threats.

The company believes a big part of the success of its firewall product is due to its simplicity, with automation and machine learning saving users’ time and improving security outcomes.

The breadth of its technology platform also reduces the total cost of ownership by eliminating the need for multiple security software and hardware products.

The strength of the company’s technology has been recognized by IT consulting firm Gartner Inc., whose analysis of market trends has placed PANW as a leader in firewalls for eight consecutive years. PANW has also been rated the highest in its ability to execute and furthest in its completeness of vision.

The company’s Cortex platform uses artificial intelligence (AI) to analyze the data found in networks to stop the most sophisticated security threats.

PANW’s stock sells well below the all-time high of $260.63, in part due to the August resignation of an Executive Vice-President of Worldwide Sales, which followed the July resignation of the Chief Marketing Officer — causing concerns about continuity in the company’s sales and marketing divisions.

However, a lot of the concerns were diminished when the company reported strong fourth-quarter results in September, with sales up 22% and EPS of $1.47 vs. $1.34, which was $0.05 above expectations.

What really got investors excited, though, was an 180% increase in billings from PANW’s next generation products, as these products now represented 18% of total quarterly billings.

The company has a strong and broad technology platform and reasonable valuation for a software company offset by a very competitive cybersecurity environment.

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