Why PANW Stock Is the Best Cybersecurity Pick News ad

Palo Alto Networks Inc. NASDAQ:PANV is a global leader in cybersecurity at a time when cybersecurity is more important than ever. Since its founding as a leading firewall manufacturer, Palo Alto’s business has evolved to meet the growing threats that continue to emerge.

Palo Alto Networks today

PANV

Palo Alto Networks

$173.42 +0.59 (+0.34%)

As of 01/10/2025 16:00 Eastern

52 week range

$130.04

▼

$207.24

P/E ratio

22.58

Target price

$199.29

One of these threats comes from artificial intelligence (AI), which has increased the risk of threats for companies of all sizes. The AI ​​cybersecurity market could grow from $14.9 billion in 2021 to a whopping $133.8 billion by 2030, according to Acumen Research and Consulting.

PANW stock has delivered a total return of approximately 98% over the past three years and underwent a 2:1 stock split in December 2024. However, in this competitive environment, is PANW your best choice for 2025? There are several reasons why Palo Alto continues to look like a solid choice for buy-and-hold investors.

For years, the cybersecurity community has debated whether a platform or “best-of-breed” approach is appropriate for providing companies with cybersecurity. What does it mean? A company like Palo Alto offers security offerings across the cyber threat landscape. Matrix: Network Security, Cloud Application Security, Security Operations, and Endpoint Security. Now imagine that dozens of cybersecurity companies offer solutions in one or more of the above categories, and you can understand the essence of the debate.

In early 2024, Palo Alto firmly established itself in the platform camp by launching its platformization strategy through cloud computing services. This allows customers to get discounts (and sometimes big discounts) on some of Palo Alto’s security offerings by purchasing multiple of the company’s products.

Analysts and investors were initially skeptical about the announcement, but the company is delivering. In its fiscal first quarter 2025 earnings report, Palo Alto reported a 40% year-over-year increase in annual recurring revenue (ARR) from its next-generation security (NGS) products. The company also grew $1 million accounts by 13% YoY and $5 million accounts by 30% YoY.

Palo Alto is making a concerted effort to enter the security information and event management (SIEM) market. A SIEM system collects and analyzes security data from various parts of an organization’s IT department, helping organizations detect and respond to security threats. This is important for businesses of all sizes, especially as hackers become more sophisticated.

It’s not exactly a David and Goliath story, but to break into this market, Palo Alto will have to take market share from established players like Splunk. And Microsoft Corporation (North Carolina)SDAK: MSFT). Other Palo Alto competitors, including Fortinet Inc. NASDAQ: FTNTthey also want their share of this pie.

It’s a market worth about $10 billion, which Palo Alto expects to grow to a $30 billion market. Palo Alto’s goal is to become the third largest player in this space. If the company has correctly assessed the growth of this market, there will be a fairly large market share.

Despite being down about 14% from its December high, PANW shares are still trading at around 49.5x forward earnings. That’s down from the 56.8x the stock had in December 2024, but it’s still a significant premium among tech stocks and to the sector average of about 32x.

However, value is often in the eyes of investors. Compared to 2024, dear CrowdStrike Inc. NASDAQ: CRWDPalo Alto’s P/E ratio looks relatively low considering you’re buying an industry leader.

Analysts are forecasting 22% earnings growth for the company, expecting Palo Alto to continue making progress in increasing operating margins. The same analysts have mixed views on PANW stock’s near-term outlook, but the consensus price target of around $199 suggests PANW stock will test its split-adjusted December price by the end of 2025.