Skip to Content
Stock Strategist

Firewall Leader Set to Expand

We believe Palo Alto Networks is an attractive investment in cybersecurity.

Mentioned:

On the way to taking the firewall market crown,  Palo Alto Networks (PANW) developed considerable customer switching costs, in our view. We have raised our economic moat rating to narrow from none and are sustaining our positive moat trend rating. Palo Alto is expanding its subscriptions to cover hybrid cloud security concerns with items such as analytics, automated response, and machine learning, which we see as growth catalysts to supplement its strong firewall offerings. We expect the company will gain significant operating leverage in the coming decade as recurring subscription and support revenue streams flow from its expansive customer base. Given our higher top- and bottom-line expectations, we have raised our fair value estimate to $305 per share from $217. We believe this 4-star stock represents an attractive investment opportunity in the cybersecurity market.

Palo Alto became a leading cybersecurity provider with its next-generation firewall appliance, forever altering the requirements of this essential piece of networking security. Its offerings grew to include diversified security subscriptions that attached to firewall appliances, as well as solutions such as protection and automated responses for cloud-based traffic and data, software-as-a-service applications, and endpoints. In our view, cybersecurity will remain a top concern for enterprises and governments as the growing quantity of data and traffic being generated outside of centralized data centers increases the possible attack vectors and drives up security management complexity. We think IT teams are clamoring for security consolidation, and Palo Alto’s security operating platform helps centralize security orchestration and management. We believe the ability to add technologies via subscriptions in the Palo Alto framework can alleviate security complications by providing a more holistic solution, which equates to sustainable demand for the company’s solutions.

Mark Cash does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.