Palo Alto Networks (PANW) AI Stock Analysis

• Market Cap: $130.87B
• Dividend Yield: N/A
• Average Volume (3M): 4.99M
• Price to Earnings (P/E): 112.3
• Beta (1Y): 1.34
• Revenue Growth: 13.91%
• EPS Growth: -50.96%
• Country: US
• Employees: 15,758
• Sector: Technology
• Sector Strength: 79
• Industry: Software - Infrastructure
• EPS (TTM): 0.80
• Shares Outstanding: 666,800,000
• 10 Day Avg. Volume: 3,642,835
• 30 Day Avg. Volume: 4,991,993
• PEG Ratio: 5.65
• Price to Book (P/B): 13.50
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 23.16
• Enterprise Value/Market Cap: 0.59
• Enterprise Value/Revenue: 2.28
• Enterprise Value/Gross Profit: 11.78
• Enterprise Value/Ebitda: 13.24
• 1Y Price Target: $214.83
• Price Target Upside: 9.46% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 38

• Rating: 81 Outperform
• Price Target: $216.00 ▲(10.05%Upside)

Palo Alto Networks demonstrates strong financial performance and impressive growth in next-generation security and AI-driven innovations as highlighted in the earnings call. While technical indicators suggest potential for further growth, the high valuation presents a risk if growth expectations are not sustained. Overall, the company is well-positioned for future success, with strategic investments and a robust product pipeline supporting its growth trajectory.

Positive Factors

Financial Performance

Palo reaffirmed FY25 NGS ARR and RPO guidance, while raising the midpoint of Revenue, Operating Margin, and Adjusted FCF Margin guidance.

Platformization Strategy

Momentum in Platformization, key solution categories (XSIAM) and improving margins keeps constructive on PANW.

Product Development

PANW is taking a leadership position among platform vendors to invest in Security for AI ahead of broader AI adoption.

Negative Factors

Performance Metrics

The stock traded off after hours in part due to softer than anticipated NNARR, RPO and cRPO growth.

Revenue Expectations

Shares traded down ~4% in after-hours trading given some offsetting metrics (RPO grew 19% Y/Y at the low-end of guidance and below expectations, and Subscription/Support revenue, gross-margin, and CFFO/FCF were also below expectations).

Palo Alto Networks Business Overview & Revenue Model

Company Description

Palo Alto Networks, Inc. is a global cybersecurity leader, specializing in providing comprehensive security solutions for enterprises, service providers, and government entities. Headquartered in Santa Clara, California, the company offers a wide range of products and services, including advanced firewalls, cloud-based security solutions, endpoint protection, and threat intelligence. Palo Alto Networks is renowned for its innovative approach to cybersecurity, leveraging artificial intelligence and machine learning to deliver robust protection against cyber threats across networks, endpoints, and the cloud.

How the Company Makes Money

Palo Alto Networks generates revenue primarily through the sale of its cybersecurity products and services. The company's revenue model is based on a combination of product sales, subscription services, and support and maintenance contracts. Product sales include advanced firewall systems and other hardware components. Subscription services, which are a significant and growing part of the company's revenue, encompass cloud-based security offerings, threat intelligence updates, and software licenses. Support and maintenance contracts provide ongoing technical assistance and updates for hardware and software products. Additionally, Palo Alto Networks has strategic partnerships with cloud service providers and cybersecurity technology firms, which further contribute to its earnings by expanding its product offerings and market reach.

Palo Alto Networks Financial Statement Overview

Summary

Palo Alto Networks showcases strong financial performance with significant revenue growth, efficient cost management, and robust cash generation. The company's low leverage and solid return on equity enhance its financial stability. While there are minor concerns regarding the increase in liabilities and the dip in net income, the overall trajectory remains positive.

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
8.87B	8.03B	6.89B	5.50B	4.26B	3.41B
	Gross Profit
6.53B	5.97B	4.98B	3.78B	2.98B	2.41B
	EBIT
984.10M	683.90M	387.30M	-188.80M	-304.10M	-179.00M
	EBITDA
1.66B	1.28B	387.30M	95.60M	-46.60M	364.80M
	Net Income Common Stockholders
1.24B	2.58B	439.70M	-267.00M	-498.90M	-267.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.86B	2.58B	2.39B	3.63B	2.90B	3.75B
	Total Assets
6.82B	19.99B	14.50B	12.25B	10.24B	9.07B
	Total Debt
1.82B	1.41B	2.27B	3.95B	3.54B	3.42B
	Net Debt
553.40M	-124.90M	1.14B	1.83B	1.67B	462.70M
	Total Liabilities
5.31B	14.82B	12.75B	12.04B	9.48B	7.96B
	Stockholders Equity
1.52B	5.17B	1.75B	210.00M	763.60M	1.10B
Cash Flow		Free Cash Flow
2.44B	3.10B	2.63B	1.79B	1.39B	821.30M
	Operating Cash Flow
2.58B	3.26B	2.78B	1.98B	1.50B	1.04B
	Investing Cash Flow
-1.09B	-1.51B	-2.03B	-933.40M	-1.48B	288.00M
	Financing Cash Flow
-584.10M	-1.34B	-1.73B	-806.60M	-1.10B	673.00M

Palo Alto Networks Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 196.27
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PANW, the sentiment is Positive. The current price of 196.27 is above the 20-day moving average (MA) of 192.64, above the 50-day MA of 183.06, and above the 200-day MA of 184.06, indicating a bullish trend. The MACD of 3.24 indicates Positive momentum. The RSI at 57.22 is Neutral, neither overbought nor oversold. The STOCH value of 52.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PANW.

Palo Alto Networks Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CHKP	82 Outperform	$23.73B	28.91	30.92%	―	6.40%	6.49%
PANW	81 Outperform	$130.87B	112.31	21.16%	―	13.91%	-50.96%
FTNT	80 Outperform	$77.18B	41.50	205.91%	―	13.83%	58.13%
CRWD	79 Outperform	$119.79B	721.64	-5.76%	―	25.94%	-226.80%
NET	74 Outperform	$59.61B	―	-7.35%	―	27.79%	56.19%
ZS	72 Outperform	$47.01B	―	-2.68%	―	25.46%	49.20%
Sector *	62 Neutral	$11.80B	10.10	-7.47%	2.99%	7.37%	-8.16%

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.