Palo Alto Networks (PANW) AI Stock Analysis

• Market Cap: $109.36B
• Dividend Yield: N/A
• Average Volume (3M): 4.81M
• Price to Earnings (P/E): 86.8
• Beta (1Y): 1.32
• Revenue Growth: 13.86%
• EPS Growth: -46.44%
• Country: US
• Employees: 15,758
• Sector: Technology
• Sector Strength: 40
• Industry: Software - Infrastructure
• EPS (TTM): 1.77
• Shares Outstanding: 662,100,000
• 10 Day Avg. Volume: 5,514,542
• 30 Day Avg. Volume: 4,810,089
• PEG Ratio: 0.16
• Price to Book (P/B): N/A
• Price to Sales (P/S): 14.08
• Price to Cash Flow (P/CF): 54.20
• P/FCF Ratio: 54.20
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $216.87
• Price Target Upside: 41.22% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 33

Palo Alto Networks demonstrates strong financial performance and strategic growth, bolstered by positive earnings call insights and impactful corporate events. However, high valuation metrics and technical indicators suggest caution in the short term.

Positive Factors

Market Position

Palo Alto Networks holds a strong market position in software firewalls, with nearly 50% share in Virtual Firewalls and Firewall as a Service.

Revenue Growth

Palo Alto Networks announced results that exceeded market expectations, with total revenue up 14.3% YoY and non-GAAP net income up 12% YoY, driven by more optimized-than-expected sales and marketing spending.

Strategic Growth

Management highlighted large deal wins, which validate the platformization strategy and should help drive market share gains and margin expansion over the long term.

Negative Factors

Market Growth Limitations

The firewall appliance market is expected to grow only 0-5% per annum, which may limit growth opportunities in this segment.

Potential Competition

The pending acquisition of Wiz by Google presents opportunities for Palo Alto, as it may create friction with customers and concerns about Wiz's multi-cloud capabilities.

Palo Alto Networks Business Overview & Revenue Model

Company Description

Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. The company offers firewall appliances and software; Panorama, a security management solution for the control of firewall appliances and software deployed on an end-customer's network and instances in public or private cloud environments, as a virtual or a physical appliance; and virtual system upgrades, which are available as extensions to the virtual system capacity that ships with physical appliances. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, uniform resource locator filtering, laptop and mobile device protection, and firewall; and DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention. In addition, the company offers cloud security, secure access, security analytics and automation, and threat intelligence and cyber security consulting; professional services, including architecture design and planning, implementation, configuration, and firewall migration; education services, such as certifications, as well as online and in-classroom training; and support services. Palo Alto Networks, Inc. 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, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. The company was incorporated in 2005 and is headquartered in Santa Clara, California.

How the Company Makes Money

Palo Alto Networks generates revenue primarily through the sale of its cybersecurity products and associated subscription services. The company offers advanced firewall appliances and software, which form a significant portion of its revenue. In addition to hardware sales, the company provides software subscriptions that offer ongoing threat intelligence, malware prevention, and security analytics, supporting a recurring revenue model. Professional services, including consulting, education, and support, also contribute to its earnings. Key partnerships with other technology providers and integrators help expand its market reach and enhance its product offerings, further bolstering its revenue streams.

Palo Alto Networks Financial Statement Overview

Summary

Palo Alto Networks exhibits strong financial performance with significant revenue growth, efficient cost management, and robust cash generation. However, minor concerns include a dip in net income and an increase in liabilities.

Income Statement

Palo Alto Networks has shown strong revenue growth, with a significant increase in Total Revenue from $8.03 billion in 2024 to $8.57 billion in TTM (Trailing-Twelve-Months). The Gross Profit Margin is robust at 73.9%, indicating efficient cost management. The Net Profit Margin is healthy at 14.6%, and both EBIT and EBITDA margins have improved compared to the previous year, reflecting enhanced operational efficiency. However, the decrease in Net Income from 2024 is a concern, which slightly offsets the overall positive performance.

Balance Sheet

The company maintains a solid financial position with a Debt-to-Equity Ratio of 0.14, indicating low leverage. The Return on Equity (ROE) is a strong 19.7%, showcasing efficient utilization of equity to generate profits. The Equity Ratio stands at 30.4%, reflecting a stable capital structure. While the overall balance sheet is strong, the slight increase in total liabilities requires monitoring to ensure financial stability.

Cash Flow

Operating Cash Flow is robust at $3.11 billion, demonstrating strong cash generation capability. The Free Cash Flow to Net Income Ratio is particularly impressive, highlighting effective cash management strategies. The Free Cash Flow Growth Rate is consistent, further reinforcing the company's ability to support growth and investment activities through internally generated funds. The cash flow statement presents a very positive picture, with minimal concerns.

Breakdown
TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement		Total Revenue
8.57B	8.03B	6.89B	5.50B	4.26B	3.41B
	Gross Profit
6.33B	5.97B	4.98B	3.78B	2.98B	2.41B
	EBIT
945.70M	683.90M	387.30M	-188.80M	-304.10M	-179.00M
	EBITDA
1.52B	1.28B	387.30M	95.60M	-46.60M	364.80M
	Net Income Common Stockholders
1.25B	2.58B	439.70M	-267.00M	-498.90M	-267.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
82.82M	2.58B	2.39B	3.63B	2.90B	3.75B
	Total Assets
136.66M	19.99B	14.50B	12.25B	10.24B	9.07B
	Total Debt
0.00	1.41B	2.27B	3.95B	3.54B	3.42B
	Net Debt
-82.82M	-124.90M	1.14B	1.83B	1.67B	462.70M
	Total Liabilities
199.21M	14.82B	12.75B	12.04B	9.48B	7.96B
	Stockholders Equity
-62.56M	5.17B	1.75B	210.00M	763.60M	1.10B
Cash Flow		Free Cash Flow
3.02B	3.10B	2.63B	1.79B	1.39B	821.30M
	Operating Cash Flow
3.11B	3.26B	2.78B	1.98B	1.50B	1.04B
	Investing Cash Flow
-980.00M	-1.51B	-2.03B	-933.40M	-1.48B	288.00M
	Financing Cash Flow
-1.68B	-1.34B	-1.73B	-806.60M	-1.10B	673.00M

Palo Alto Networks Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 153.57
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PANW, the sentiment is Negative. The current price of 153.57 is below the 20-day moving average (MA) of 177.68, below the 50-day MA of 185.35, and below the 200-day MA of 179.59, indicating a bearish trend. The MACD of -3.35 indicates Positive momentum. The RSI at 38.12 is Neutral, neither overbought nor oversold. The STOCH value of 16.79 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PANW.

Palo Alto Networks Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CHKP	79 Outperform	$23.36B	28.91	30.15%	―	6.22%	6.15%
PANW	78 Outperform	$109.36B	86.76	23.38%	―	13.86%	-46.44%
ZS	73 Outperform	$29.74B	―	-1.21%	―	27.77%	89.39%
CRWD	73 Outperform	$86.11B	721.64	-0.69%	―	29.39%	-119.62%
FTNT	70 Outperform	$68.78B	37.48	338.74%	―	12.27%	54.69%
Sector *	57 Neutral	$18.57B	9.42	-13.42%	2.72%	5.01%	-23.43%
NET	55 Neutral	$37.06B	―	-8.71%	―	28.76%	58.13%

Palo Alto Networks Corporate Events

Palo Alto Networks Expands Board with Notable Appointments

On February 12, 2025, Palo Alto Networks appointed Helle Thorning-Schmidt, former Prime Minister of Denmark, and Ralph Hamers, former CEO of UBS Group AG and ING Group, to its Board of Directors as Class II directors. With these appointments, the board expands from nine to eleven members, reflecting the company’s strategic effort to enhance its global reach and secure its position as a cybersecurity leader. Both appointees bring extensive experience in political and business landscapes, expected to influence the company’s strategic direction and strengthen its industry position.