Palo Alto's Platform Approach Shines in Q3 and We See Shares Undervalued to Our $585 FVE

We are maintaining our $585 fair value estimate for wide-moat Palo Alto Networks after its strong third quarter topped our expectations for revenue growth and earnings. Shares increased by more than 10% on the robust results and guidance was boosted for fiscal year 2022. We still see shares as undervalued and expect Palo Alto to continue distancing itself from peers over the long term with share gains in core firewall as well as solutions for cloud and automation. Palo Alto's leading platform approach for network security, cloud security, and security automation is spurring organizations to consolidate spending toward its products, which increases switching costs, in our view. In turn, we think customers become further locked into Palo Alto's ecosystem and this momentum is helping the company's march toward GAAP profitability.