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Palo Alto Networks Inc PANW

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Software, Cloud Security, and Automation Accelerate Palo Alto’s Growth in Q2; Raising FVE to $400

Mark Cash Senior Equity Analyst

Analyst Note

| Mark Cash |

Palo Alto Networks’ 25% year-over-year revenue growth in the second quarter surpassed our expectations as sales pushed above the $1 billion threshold for the first time. We believe investor concerns surrounding the firewall transition from hardware to software and Palo Alto’s ability to grow outside of firewall can be pacified. The firewall business continues to generate abundant free cash flow, whether in physical or virtual forms, which is fueling the higher growing cloud and automation security solutions. We are raising our fair value estimate to $400 from $345 per share, as we expect higher revenue growth and an improved margin profile emanating from next generation security products over the longer term. Shares of this narrow-moat cybersecurity stalwart are slightly undervalued, in our view.

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Company Profile

Business Description

Palo Alto Networks is a pure-play cybersecurity vendor that sells security appliances, subscriptions, and support into enterprises, government entities, and service providers. The company's product portfolio includes firewall appliances, virtual firewalls, endpoint protection, cloud security, and cybersecurity analytics. The Santa Clara, California, firm was established in 2005 and sells its products worldwide.

3000 Tannery Way
Santa Clara, CA, 95054
T +1 408 753-4000
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jul 31, 2021
Stock Type Speculative Growth
Employees 9,038