Why PANW Stock is a Top Cybersecurity Pick

Palo Alto Networks Inc. NASDAQ: PANW The world’s cybersecurity leader at a time when cybersecurity has never been more critical. From its beginnings as a leading creator of firewalls, the Palo Alto business has evolved to meet the growing threats that continue to emerge.

Palo Alto Networks today

PANW

Palo Alto Networks

$173.42 +0.59 (+0.34%)

04:00 pm Eastern

52-week range

$130.04

▼

$207.24

P/E ratio

22.58

Price target

$199.29

One of these threats comes from artificial intelligence (AI), which has increased threat risk for companies of all sizes. According to Acumen Research & Consulting, the AI-based cybersecurity market could grow from $14.9 billion in 2021 to $133.8 billion by 2030.

PANW stock has returned nearly 98% over the past three years and has a 2:1 stock split in December 2024. However, in this competitive landscape, is PANW your best choice for 2025? Here are a few reasons why Palo Alto looks like a solid choice for investors.

For years, the cybersecurity community has debated whether a single platform or “best-of-breed” approach to their cybersecurity was right for companies. What does this mean? Companies like Palo Alto offer security offerings across the entire cyber threat matrix: network security, cloud-native application protection, security operations, and endpoint security. Now, consider that there are dozens of cybersecurity companies offering one or more of the above categories. solution in, and you can see the nature of the debate.

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

Analysts and investors initially reacted to the announcement with skepticism, but the company is delivering. In its first-quarter earnings report for fiscal 2025, Palo Alto reported 40% year-over-year (YoY) growth in annual recurring revenue (ARR) for next-generation security (NGS) products. It grew its number of $1 million accounts by 13% YoY and its $5 million accounts by 30% YoY.

Palo Alto is making a concerted effort to penetrate 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 essential for businesses of all sizes, especially as hackers become more sophisticated.

It’s not exactly a David vs. Goliath story, but to penetrate this market, Palo Alto will have to take market share from established players like Splunk. And Microsoft Corporation (NA(SDAQ: MSFT). Other competitors from Palo Alto, incl Fortinet Inc. NASDAQ: FTNTWant their share of this pie too.

It’s a roughly $10 billion market that Palo Alto believes will grow into a $30 billion market. Palo Alto aims to become the third largest player in this space. If the company is right in sizing up this market growth, there will be plenty of market share to go around.

Despite falling nearly 14% from its December high, PANW stock still trades at about 49.5x forward earnings. That’s lower than the stock’s 56.8 times as of December 2024, but it’s still a hefty premium Technology stocks and to about 32x the sector average.

However, value is often in the eyes of investors. When compared to 2024 Darling CrowdStrike Inc. NASDAQ: CRWDPalo Alto’s P/E ratio looks relatively cheap when you consider you’re buying an industry leader.

Analysts are forecasting 22% earnings growth for the company on expectations that Palo Alto will continue to make progress in expanding its operating margins. The same analysts have mixed views on the short-term outlook for PANW stock, but a consensus price target of around $199 suggests that PANW stock will test its dividend-adjusted December price through the end of 2025.