Palo Alto Networks (NYSE:PANW) is a top stock to watch. The company responsible for creating and terming the Next-Generation Firewall (NGFW) market back in 2005 is now busy impressing the market with its platform-based approach and hybrid SaaS model. Although shares tanked in November/December (from $164 to $125) following disappointing fiscal Q1 report and Q2 guidance, prices have since recovered to $155 as the market regains its confidence. Let’s see why:
PANW’s endpoint security solution Traps was first introduced to the market back in 2014. Palo Alto believes that traditional antivirus (AV) security measures can no longer stop today’s cyber attacks. In contrast to AV, Traps employs a “multi-method prevention”: a combination of malware and exploit prevention methods designed to pre-emptively block known and unknown threats.
As of FQ1, the Traps module has 600 customers, up from 300 at the last PANW analyst day, and this number is expected to grow as the company continues to invest in endpoint security. A next-generation market leader has yet to emerge in this space, which leaves room for Palo Alto to expand its customer base quickly.
Four-star JMP Securities analyst Erik Suppiger says that spending on IT security increased in Q4 and has even started to accelerate, while “the next-generation data center switching market remains healthy.” In fact, San Francisco’s RSA conference, the biggest security conference in the world, saw attendance surge in 2017 to over 43,000 attendees, up from 40,000 last year.
And if we look at demand over a longer time span, then research firm Markets and Markets has estimated that the global cyber security market will grow from $106.3 billion in 2015 to $170.2 billion by 2020.
While Palo Alto faces competition from security giants like IBM (NYSE:IBM), Juniper (NYSE:JNPR) and Cisco (NASDAQ:CSCO), which has been snapping up smaller security firms to boost its firewall and threat…