These Top Analysts Think Palo Alto Will Still Outperform

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Palo Alto Networks, Inc
PANW
is hosting its Ignite User Conference in Las Vegas, Nevada this week. FBR Capital Markets analysts said in a report published Tuesday, "The overall theme of the conference has been the company's next-generation cybersecurity platform with its prevention-focused technology, as well as its growing product footprint/market share gains on the heels of strong secular tailwinds (e.g., evolving threat environment)." During a half-day analyst day for investors, the management highlighted its vision and technology strategy, focusing on the unique platform that integrates its threat intelligence cloud, advanced endpoint protection, and next-generation firewall (NGFW). The analysts believe this is "a powerful combination" that should "help continue to drive rapid top-line growth over the coming quarters/years." "As evidenced by company presentations, Palo Alto has major cross-sell opportunities with its next-generation firewall and subscription services (e.g., Wildfire) at the core, while newer technologies (big data analytics for security) are also adding tailwinds, in our opinion," the report added. The analysts expect analytics-based threat prevention to experience "greater adoption at the enterprise," since a host of threats "make tracking and analyzing network/data traffic beyond the firewall a necessary complement to other offerings including advanced persistent threat protection (APT), NGFW, email security, and mobile/cloud security." Palo Alto seems to be "doing the right things at the right time with "red-hot" growth prospects given execution acumen, a laser-focused growth strategy, and expanding TAM." FBR Capital Markets maintained an Outperform rating for the company. In a separate report, Morgan Stanley analysts, who have an Overweight rating on Palo Alto, said that the company "has a significant opportunity within its own customer base of 22.5K today, through a ramping appliance refresh and the coinciding upsell opportunity." "Subscription attach is already ramping with 2.2 subscriptions per box in Q2 FY15 versus 1.8 subscriptions per box a year ago. Management also noted a $5B lifetime value opportunity just within its existing customer base, assuming a similar ramp in spend as seen in the 2009 cohort," the analysts wrote. The report mentioned the company's several different components of a growing footprint: "1) ramping field sales: management noted 55% of field sales are fully ramped versus 42% in the year ago period; 2) new technology partnerships: Palo Alto remains bullish on its partnership with VM Ware to secure east-west network traffic while management also announced a new tech partnership with Air Watch for its Global Protect subscription service, expected to market in the late Summer; and 3) expanding reseller/system integrator partners: Palo Alto Networks has signed up a number of new significant reseller relationships, including Westcon for the EMEA and APAC regions, which now represents well over $300M in business, growing ~120% YoY." The analysts added, "Ramping distribution channels should enable Palo Alto to best take advantage of its growing product portfolio and capture share."
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Posted In: Analyst ColorReiterationAnalyst RatingsFBR Capital MarketsMorgan Stanley
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