Enterprises are now more concerned about security of their network and data. In this present web world, cyber security plays an important role. With a booming security market, companies like Palo Alto Networks (PANW, Financial) are seeing good growth. The company started the fiscal 2015 on a strong note and has kept this momentum rolling which can be seen by solid 54% revenue growth in the recently reported second quarter.
The next generation security platform appears solid, and Palo is confident for an upbeat performance throughout 2015. With its future looking bright, Palo is largely counting on its unique business model expecting it to deliver industry leading revenue growth rates in the upcoming quarter.
Looking well positioned
Palo Alto has many bright spots which seem to be driving its financial performance in the future. The company is adding new customers at impressive rates. For example, in the recently reported quarter, Palo added over 1,500 new customers, bringing its total count to 22,500 customers. This is a solid 40% growth on a yearly basis. With these new customers added to its camp, the company is also seeing new customer wins with some of the big shot companies which is a good achievement for Palo as it will surely strengthen it market image. The new customer wins include companies such as CheckPoint (CKP, Financial) and Cisco (CSCO, Financial).
The key reason for Palo’s success is its relentless focus on achieving customer satisfaction. The company has succeeded so far and is focusing on continuing it to achieve more customer satisfaction leading to repeat purchases. To make it smooth, Palo is emphasizing greatly on customer service and support. In addition, the customers' need for a better security service is increasing day by day, and Palo is taking innovative steps to fetch this bright opportunity. For example in the high-end data center market, its 120-gig PA-7050 chassis is gaining good traction across the enterprise customers.
In 2015, Palo is planning to capitalize on its macro tailwinds. It is also planning to make significant investments in security and technological advancement of its next generation platforms to expand its large customer base further.
The security market is positive
The recent advancement in science has touched almost every landscape of technology and cyber security has become a prime preference of the enterprises. With the growing technology, the need for cyber security, business security and national security will also grow as the legacy technological solutions lack in securing businesses in the age of sophisticated cyberattacks. This is giving many companies such as Palo Alto bright chances to bring in cutting-edge solutions, satisfying customer needs. In addition, the growth of the segments such as data centers and internet of things are further creating needs for a better security offering.
Cisco can be a threat
Palo seems well positioned for better financial performance, but Cisco can be threat to the company which is also moving on well in the league. Cisco recently released Cisco MDS 9000 NX-OS software recently in this regard which are seeing good response in the market. Palo Alto besides relying on the growing tech markets should also work on its product pipeline to be competent in the market.
Moving to the fundamentals, the forward P/E of 90.10 shows that Palo Alto’s earnings are expected to grow at an impressive pace in the near term. The stock can also be a solid long-term holding as its earnings for the next five years are growing at a CAGR of 49.09% as compared to industry average of 20.34%. If Palo Alto can bring in new products out of its pipeline, the stock can gain much market share. But as of now the stock is a good pick, worth your dollars.
