Morningstar | We Expect Growth and Margin Expansion as Palo Alto Networks Builds an Ecosystem of Products
Palo Alto Network’s next generation firewall, or NGFW, technology induced expeditious growth within the network security software and equipment space and helped capture share from incumbents. We believe the firm’s impressive technology and relentless marketing strategy have propelled the firm from an upstart to cementing a spot in the pantheon of elite cybersecurity vendors in only a few years. Further, an overall increase in cybersecurity scandals, including recent headline issues that have plagued major firms, and the commensurate increase in enterprise budgeting to prevent against such threats, bodes well for Palo Alto. Palo Alto’s leading role in the development of NGFW helped it gain widespread acceptance among enterprise customers. The success of the firm’s firewall segment and strategic cybersecurity acquisitions have allowed Palo Alto to expand its portfolio, leading to a greater number of cross-sells and upsells for existing clients. The firm’s platform approach has allowed for tight integration between products and we see further portfolio expansion ahead, particularly in the cloud and endpoint protection markets.Palo Alto’s aggressive sales and marketing spending has been efficacious in spurring top-line growth, but the firm has yet to post a year of positive GAAP net income. While we expect margins to normalize over the next decade, this is contingent on management extracting greater leverage from its salesforce and beginning to exercise cost discipline. Palo Alto will need to remain at the technological forefront of a highly competitive industry and we believe the easy market share gains have already been made and project more muted top-line growth relative to historical numbers for this name. Overall, we applaud Palo Alto’s engineering proficiency, acquisition strategy, and successful marketing efforts, which have allowed it to compete with the likes of Cisco, Check Point, and Juniper. These efforts lead us to believe that Palo Alto will continue to be successful in its platform-building efforts in the long run, but formidable rivals will begin to test Palo Alto’s ability to grow at a breakneck clip.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.