Palo Alto Networks (PANW, Financial) has started the new fiscal year strongly. The company posted better-than-expected results, which also exceeded analysts’ estimates on both revenue and earnings. The sequential growth in the financials indicates that Palo Alto’s business as a provider of end-to-end enterprise class protection and prevention is gaining good traction in the market which is driving more customers to it, driving its financial performance. The company having delivered strong results in the past is now expecting better performance by its businesses in the future. The management is striding hard to improve its market share. For this, it is now focusing on various other alternatives to improve its profitability.
Growing at a robust pace
The 50% growth in revenue and a solid 52% growth in bookings indicates that the company has a lot of steam and has a long way to go. To drive its growth further, Palo Alto is focusing mainly on three key aspects. Palo Alto is having great expectations from the security segment and to address it further, the company continues to invest meaningfully in that initiative. In addition, security battle prevention remain Palo Alto’s ultimate objective. To address this, the company has an integrated and automated next generation security platform which is unique and delivers unparalleled prevention capabilities.
The company also has many key points that can be a good drivers for its long-term prospects. It has good objectives in its land and expand strategies. Under the land strategy the company is acquiring customers at solid pace and it is now pleased to serve about 21,000 customers globally. In addition, the expand segment of the company is also showing positive response.
In this regard the company is seeing customers turning up to the Palo Alto services and they are also making repeat purchases rapidly due to Palo Alto’s technology. The main reason behind this attraction is that Palo Alto’s platform provides the customers with the most comprehensive protection and prevention in the market for all its security use cases.
Products are gaining momentum
The company is seeing good acceptance of its products in the market. It is see a robust adoption of its high end PA-7050 chassis. To further enhance its offering and to attract more customers, Palo Alto has recently launched its newest PA-3060 chassis for its mid-sized enterprise customers’ datacentre use cases. In the prevention, Palo Alto is seeing a good market for advanced persistent threat solutions. Its previously brought in real time and Malware prevention is showing good response. With the growth in the need for prevention, the customer will be in need of more such offerings, which is expected to drive demand for the company’s prevention solution in future.
Palo Alto is also engaged in bringing in solution that will solve customers’ most complex security needs. To meaningfully address this initiative, Palo Alto continues to innovate its offerings also helping the customers to securely embrace the technologies such as Cloud and Mobility. Moreover, the expanded relationship of the company with VMware is helping the company well by enabling it to provide its advanced security to VMware’s public cloud platform vCloud Air. This will Palo Alto to enhance its market position across both public and private growth environment.
Conclusion
The stock doesn’t have a trailing P/E as the company might be incurring some losses. But the forward P/E of 80.62 indicates solid growth in the earnings in the near term. The stock can also be a strong long-term holding as its earnings are growing at a CAGR of 45.98% which is better than the industry average of 20.58%. Considering all these points, it is clear that the stock is a good pick and the investors should definitely include it in their portfolio.
