Palo Alto Networks, a leading cybersecurity company, has made itself a critical provider in the industry with its legacy online security products and updated offerings. However, the competitive nature of the online security industry means organizations have numerous choices when it comes to providers.
The company’s financials reflected some of the mixed feelings investors may have toward the stock, and the stock struggled to gain traction after offering some modules for free to give companies an incentive to purchase all cybersecurity services from the company. Despite this, Palo Alto’s stock recovered and grew modestly over the past year, and it even initiated a 2-for-1 stock split.
In the first quarter of fiscal 2025, revenue grew 14% compared to the same quarter in fiscal 2024, with bright spots such as the annual recurring revenue for its next-generation firewall, which grew 40%. Palo Alto also controlled the growth in operating expenses, limiting them to a 9% increase, resulting in a net income of $351 million.
The company forecasts 14% revenue growth in fiscal 2025, with next-generation firewall ARR increases slowing to 31% or 32%. This growth may not necessarily translate into more investor interest, as the stock is comparatively expensive if measured by its sales multiple.
Palo Alto’s valuation may appear less appealing than its peers, with CrowdStrike growing revenue at 29% in its most recent quarter, more than double that of Palo Alto. The company’s 48 P/E ratio appears attractive considering its industry and the net losses that many peers continue to report.
However, under current conditions, Palo Alto stock does not look like a buy, at least compared to other cybersecurity stocks. The company has matched the industry’s growth, and given the rising demand for its services, it will likely continue to prosper as a business. Nevertheless, other cybersecurity companies have outpaced its growth rate, and its stock is comparatively expensive.
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