PANW - Embedded Expectations Analysis - 2019 10 29
Palo Alto Networks, Inc. (PANW:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 35.4x Uniform P/E. However, even at these levels, the market has bearish expectations for the firm, but management is confident about demand, growth, and their competitive moat.Specifically, management is confident they are the growing faster than anybody else in the cybersecurity space and that they don't see serious competition from other firewall vendors. Moreover, they are confident the lack of software-based competition allows them to be differentiated and reduce their speed of deployment, and they are confident all their customers have a growing IoT security need. Furthermore, they are confident they will see a revenue recognition mix shift in the coming years between traditional firewall and their software form factor.
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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