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Palo Alto Networks Riding High on Elevated Demand
Stock Analysis & Ideas

Palo Alto Networks Riding High on Elevated Demand

Shares of cybersecurity company Palo Alto Networks (PANW) are on the move. The ongoing migration to the cloud, and acceleration in digital transformation are driving demand for its products and offerings, and in turn, its share price.

Palo Alto Networks stock has increased by about 30% over the past month. Moreover, it has appreciated over 98.8% over the past year, reflecting product innovation, go-to-market strategy, and strong demand for its platform. I have a bullish outlook on PANW stock. (See Palo Alto Networks stock charts on TipRanks)

Thanks to the favorable industry trends, Palo Alto Networks expects its TAM (total addressable market) to expand at a healthy pace. It recently announced its three-year growth outlook, wherein it expects TAM to reach $110 billion by 2024. The outlook reflects a CAGR (compound annual growth rate) of about 14%.    

Highlighting the strength of its product portfolio, Palo Alto Networks expects its revenues to increase at a CAGR of 23% over the next three years, and reach $8 billion. Moreover, total billings are projected to reach $10 billion, reflecting a CAGR of 22%. 

Matthew Hedberg of RBC Capital said that the company’s “long-term targets are “beyond our/consensus expectations.” He maintained a Buy rating on PANW and raised his price target to $560 (16.7% upside potential) from $525. 

Hedberg’s bullish outlook is centered around the “continued momentum in the company’s next-gen security stack, durable growth in its FWaaP (Firewall as a Platform) business, and margin expansion.”

Hedberg expects Palo Alto Networks to now focus on “scaling sales productivity [more] than adding new products,” which he believes would drive margins. 

Along with Hedberg, the majority of Street is bullish on PANW. The Strong Buy consensus rating is based on 24 Buys and two Holds. The average Palo Alto Networks price target of $533.27 implies 11.1% upside potential from current levels.

Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

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