At present, Palo Alto Networks (PANW, Financial) appears to be one of the best bets in the cybersecurity industry as the company is taking shrewd steps to achieve a leading position in the growing market.
Palo Alto Networks recently reported its fiscal first-quarter 2017 earnings. The company managed to beat the earnings estimate but failed to meet the revenue estimate. However, Palo Alto’s revenue increased 34% year over year while billings surged 32% year over year. Moreover, the company produced a free cash flow of $182 million, representing a surge of 43% year over year.
In point of fact, security plays a very significant role for worldwide enterprises and organizations as hackers are continuously finding new ways to breach their network. Therefore, the company endures to seize market share at very high rates. Moreover, the company observed robust demand for its next-generation security platform from existing as well as new customers.
The company now has approximately 35,500 subscribers all over the world, signifying a surge of 1,500 new customers.
Palo Alto’s large investment in growth has permitted it to preserve growth but has also negatively impacted its net income. Despite aggressively investing in growth, the company has managed to cut their net cash used in investing actions by approximately 50% and uphold their growth. Due to this, the company was able to keep its cash flow positive and escalating.
As a matter of fact, the company’s prevailing addressable market is valued at $18.2 billion. In 2015, the company produced $1.5 billion in revenue, providing it a market share of almost 8% in network as well as end-point security. Moving onward, it is anticipated that the company will be able to improve its market share in the imminent years as it has a wide-ranging product portfolio.
Palo Alto has an extensive range of products in comparison to its competitors. Palo Alto’s Next-Generation Firewall provides more gritty control, which is necessary for prevailing internet apps and the ever-increasing mobile workforce.Â
Conclusion
Palo Alto’s extensive range of products has helped the company gain a strong lead over its competitors. The extension of the product portfolio has escalated subscription revenue to the point where recurring revenue at this time signifies 60% of all the company’s billing. Furthermore, Palo Alto’s subscriber base is growing at a strong rate, which is a plus for the company.
Palo Alto Networks is down approximately 28% year to date and the recent selloff provides an outstanding entry point into the stock.
Disclosure: I do not hold positions in the stocks mentioned in the article.
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