Palo Alto Network (PANW) Stock Forecast 2023

Palo Alto Network (PANW) Stock Forecast 2023: The average PANW Stock Price Prediction for the Next 12 Months is $226.

Latest PANW Stock Price

Palo Alto Network specializes in providing cybersecurity solutions to businesses and organizations. These solutions include network security, cloud security, and advanced threat prevention to protect against a wide range of cyber threats.

Palo Alto Network (PANW) Stock Forecast: Latest News

  • Palo Alto Networks has been named a Leader in Zero Trust Network Access by the IDC MarketScape. This means that Palo Alto Networks is one of the top providers of Zero Trust Network Access (ZTNA) solutions.
  • Palo Alto Networks has released a new integration between Cloud NGFW for AWS and Panorama. This integration provides consistent visibility of applications wherever they reside, regardless of whether they are hosted on-premises or in the cloud. This helps organizations to better protect their applications from attack.
  • Palo Alto Networks has opened a new office in London. The new office is designed to be a “cybersecurity fortress” and is equipped with the latest security technology.

PANW Stock Forecast 2023: 12-Month Target

PANW Average Target Price, 12 Months$254
Credit Suisse$260
Wells Fargo$265
RBC Capital$277

Palo Alto Network (PANW) Stock Forecast Today

UTC: Sep 25th, 2023 06:19 PM
Overall OutlookNeutral
1. Market's WisdomPartially Bearish
1a. Market DataBearish
1b. Technical RecommendationBuy
2. Crowd's WisdomNeutral
2a. Social Media BuzzSteady
2b. Social Media SentimentSteady

Palo Alto Network (PANW) Stock Forecast: About the Industry

The cybersecurity market has seen enormous growth in the last few years and is set to grow once again in 2023.   Based on a survey of 1400 corporate information Technology (IT) decision-makers, almost 75% of them are going to hike their cybersecurity spending in 2023. Similarly, Gartner estimates that there will be an increase of 11.3% to $188 billion in spending towards cybersecurity next year to prepare for the growing threat.

Also, cybersecurity companies are insulated from macroeconomic headwinds because companies do not risk digital defenses to save a few bucks.

With this backdrop, we will look at one of the leaders of this industry Palo Alto Networks, and look at the bull and bear case of the stock and try to conclude whether it is a right now or not.

Palo Alto Network Stock Forecast 2023: Bull Case

Terrific Q2 FY-22-23 financial results: The stock price has gained 35% in the current year since January 1. One of the main reasons behind it was the anticipation of strong quarterly results declared by the company on February 21st, 2023 (for three months that ended January 31). In simple words, the results were outstanding and to add to the party, the guidance for the next quarter and the complete year was also revised upside.

Palo Alto’s Q2 revenue jumped 26% YoY to $1.7 billion, beating the $1.65 billion consensus estimate. The company’s adjusted earnings shot up 81% to $1.05 per share while analysts were only expecting $0.78 per share.

For the third quarter, the company expects revenue to increase 22% to 24% YoY and its adjusted earnings per share (EPS) to climb from 51% to 58%. Similarly, for the full year, the company expects revenue growth of 23% and EPS growth to be somewhere between 58% to 60%.

The growth seems sustainable: The company’s fantastic numbers for the latest quarter are driven by strong demand for the products. There is a considerable jump in high-value transactions along with an improvement in the number of transactions. For example, Palo Alto witnessed a 19% jump in the $1 million plus deals and a 144% increase in the number of $10 million plus deals. The value of transactions for $1 million increased at a healthy rate of 59% and that of $10 million at an astonishing 144%.

Another sign that the growth of the company is sustainable is the growth in the company’s remaining performance obligations (RPO) which increased 39% over the last year to $8.8 billion. RPO measures the total contracts yet to be fulfilled by the company. In the case of Palo Alto, it is even higher than the projected forecasted revenue for the complete year which is $6.85 to $6.91 billion this year. It indicates that the company can expect similar growth in the next year and hence the growth is sustainable.

Taking the right steps to capture the growing market: Palo Alto’s growth story is based on management’s decisions. The company is taking steps to make the most of the lucrative end market it operates. The company has released 35 new major products in the first half of 2023, more than a 59% jump from the previous year.

The cybersecurity industry is a fast-paced industry that is expected to grow at a CAGR of 21% through 2030 and clock an annual revenue of $25 billion. Palo Alto is well-positioned to become the market leader in this industry.

PANW Stock Forecast 2023: Bear Case

Very High Stock Compensation paid: Stock-based compensations have become a part of the culture of Silicon Valley. But a proportion stock-based compensation is often a turning-off point for investors, as it dilutes the ownership of existing shareholders and increases the number of shares outstanding. During the recent year 2022, the company has paid stock-based compensation totaling $1.07 billion. That is almost 19% of the total fiscal year revenue or 2.1% of the market cap of the company.

Add to it, nearly a dozen acquisitions by CEO Nikesh Arora during the first few years of his tenure and that has led to a high level of stock-based compensation. Due to this compensation, the share count of total shares outstanding has increased by 8.6%, partly offset by share buybacks programs.

As Palo Alto’s business matures, the revenue and profit growth will naturally slow down and if stock-based compensation continues at this rate, EPS can take a major hit. This is one of the reasons that the company came up with 3 for 1 stock split last year in September.

It is a pricey investment: Currently, Palo Alto Networks stock is trading at 9.7 times sales and 52 times forward earnings. These are very expensive multiples compared to S&P’s sales multiple of 2.3 and earnings multiple of 18.3. Also, Palo Alto seems to have earning multiples that of a growth stock or a start-up, but it is the market leader of the cybersecurity industry and the revenue and earnings growth will mature in a couple of years down the line and the P/E ratio or price/sales ratio will look more expensive then.

Also, looking deep into financials, we observe that it is the first time that the company’s operating income is positive for the trailing twelve months in a decade despite being the market leader for quite some time. However, the gross profit was always positive for the company, but it is because of operating expenses like stock-based compensation that turned operating income negative.

The stock price at this juncture does not support the pricey valuation given that the prospects of the economy are gloomy.

Palo Alto Network (PANW) Stock Forecast: Is PANW Stock A Good Buy?

There are a couple of factors to decide upon the above question. Firstly, the industry, the cybersecurity market is a growing market that has yet not reached saturation. Secondly, PANW stock stands at a fairly better position than its competitors. For example, CrowdStrike trades at 54 times its forward earnings and 12 times this year’s sales and CrowdStrike is still unprofitable in both GAAP and non-GAAP positions.

The company is firing all cylinders by having a strong pipeline of products and making the growth more sustainable, visible through its RPO metrics.

Although the stock is itself expensive, if an investor believes in the cybersecurity industry, then PANW is one of the best stocks to remain invested in.

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

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