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Palo Alto: More Gains for "Go To" Cyber Play?
09/14/2018 5:00 am EST
Last November, we bought Palo Alto Networks (PANW) at around $140. At the time, most analysts said the stock was overvalued and destined to fall, notes Jason Williams, growth stock specialist and contributing editor to The Wealth Advisory.
But with all the news of data breaches in corporate America and the fear of cyberwarfare heating up with China, North Korea, and Russia, we decided that the industry was ripe for an investment. And after looking into all the players, we singled out Palo Alto as the best opportunity.
It already had a massive portfolio of clients that ranged from regular folks like you and me all the way to massive companies and even branches of the U.S. government. You see, Palo Alto has been crushing it ever since the company went public.
Over the past 19 quarters of earnings reports, the company has never missed analyst expectations. And it's only come in equal to them thrice. The other 16 quarters were all above expectations by an average of 10% every quarter: And even though beating expectations is great, if those expectations aren't that high, it's not much of an accomplishment.
But that hasn't been the case with Palo Alto. Sure, there have been some quarters where analysts were just way too low. But most of the beats came because Palo Alto has been growing earnings every single quarter — with only one small slip at the start of 2017.
Every quarter but one has seen more profit than the one before it. And every year, profits have topped the one before it. The most recent report recently came out and Palo Alto beat estimates by literally every conceivable metric.
Earnings were above expectations. Growth was above expectations. Revenue was above expectations. Cost savings were above expectations. And management's predictions for the rest of this year and 2019 are higher than anything analysts had been hoping for. It's led to upgrades from analysts that can move it up higher and price target hikes from those who already had it as a "Strong Buy."
Oppenheimer boosted its price target to $275. In my humble opinion, that's a conservative estimate. Corporations are still spending billions every year to keep ahead of those who would try to steal their data. The U.S. government plans to spend at least $5 billion per year for the next five years to try and catch up with our digital enemies.
Palo Alto is the go-to company for corporate, personal, and public cybersecurity. As its subscriptions base continues to grow, I expect to see shares hit the $300 level within the next 12 months. Take advantage of any dips to add to your position. We'll be holding and profiting from this one for years to come.
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