Morningstar | Palo Alto Networks Is Our Top Cybersecurity Pick and Added to the Best Ideas List
Narrow-moat Palo Alto Networks was added to our Best Ideas list and currently trades at an attractive discount to our fair value estimate of $305 per share. We expect the firewall leader's 19% five-year revenue CAGR to outpace its peers by growing within high growth areas for cloud-based cybersecurity, analytics, and automation. Complexities associated with managing various software and hardware vendors and a dearth of cybersecurity talent leads our view that firms and government entities are clamoring for consolidated security platforms. We believe Palo Alto's security platform is at the leading edge and will remain in demand as customers favor adding-on Palo Alto security subscriptions versus managing another vendor. In our view, Palo Alto's push into machine learning and automated threat responses are elevating security requirements, which should lead to new customer wins and increased revenue per customer.We posit that Palo Alto successfully executed the first part of its land-and-expand strategy by creating a sizable base of firewall customers through superior feature sets and valuable services. It is tremendously disruptive and timely to displace a trusted security provider due to the hardware installed, software acumen developed, and services employed. We view the growing quantity of cloud-based workloads as a boon for Palo Alto as firms desire a consistent security posture across their networks and end-points after becoming accustomed to Palo Alto's platform. Looking at the expand part of the strategy, we expect significant operating margin expansion as Palo Alto renews customer agreements and sells higher-margin, nascent security technologies via subscriptions and services. With a base of around 60,000 customers, we expect sales and marketing expenditures to be reeled in, as a percent of revenue, and for sales to outpace expenses, making fiscal 2020 a profitable year and for fiscal 2023 to have 14% GAAP operating margin versus a 5% loss in fiscal 2018.
Palo Alto Networks provides a platform that allows enterprises, service providers, and government entities to secure their organizations. The company's platform uses a traffic classification engine that identifies network traffic by application, user, and content and provides security across the network, endpoint, and cloud. The company's product, subscription, and support offerings include: firewall appliances and software; and Panorama, which is a centralized security management solution for global control of various firewall appliances and software deployed on an end-customer's network as well as in their instances in public or private cloud environments as a virtual appliance or a physical appliance.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.