PANW: In a Good Position for Data Security

12/31/2015 9:00 am EST


Michael Berger

President & Founder,

Even though this data security provider has rallied more than 209% during the last two years, Michael Berger, of, shares the reasons he still sees further upside in shares due to the continued growth and demand for its products and services.

Data security is critical for governments, businesses, and even home computer users. Data lost due to natural disasters is upsetting, but losing it to hackers can have much more significant consequences. Earlier this year, the United States government was the target of a massive data breach and millions of government employees and former employees had their personal information stolen from the Office of Personnel Management.

These cyber-attacks have led to an increase in demand for data security and we expect such demand to continue to increase for years to come. There are a number of data security providers and one we see significant upside with is Palo Alto Networks, Inc. (PANW). The company is aggressively expanding its product portfolio in the advanced threat, endpoint, cloud security, SDN, and security analytics markets. These markets are all being boosted by what we see as a multi-security spend cycle and PANW’s increasing deployment as a broad enterprise security platform.

PANW Continues to Beat Expectations

PANW specializes in multi-function next generation firewall appliances, which can replace several point solutions with one standalone appliance. The company pioneered application control technology, which allows firewalls to place selective usage policies for an application rather than block it entirely. PANW primarily sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries.

During the fourth quarter, PANW beat Wall Street revenue expectations and first quarter expectations exceeded analyst expectations. Revenue during the fourth quarter grew 59% on year-over-year basis and PANW generated $284 million in revenue (Wall Street expected $256 million).

Increasing Geographic Presence and Market Share

PANW continues to increase its geographic presence and take market share around the world. The company saw 36% growth in Europe, the Middle East, and Africa, 67% growth in North and South America, and 58% growth in the Asia-Pacific region. PANW added 2,000 new customers during the quarter bringing them to a total of 26,000 customers.

Expect Further Appreciation After a Two-year Rally

Even though PANW has rallied more than 209% during the last two years, we see further upside in shares due to the continued growth and demand for its products and services. One of the drivers of this demand is that PANW continues to drive a next generation replacement cycle of outdated firewall solutions.

During 2015, PANW saw a significant increase in the number of customers using its Wildfire solution during the quarter. Wildfire is used by customers who face advanced threats and PANW has more than 8,000 paying customers. With the recent launch of its Autofocus and Aperture products as a result of the CirroSecure acquisition, we expect to see revenue growth as it positions them in the high priority security analytics and cloud security markets respectively.

Michael Berger, Founder and President,

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