JP Morgan Starts Palo Alto At Overweight, Says Market Share Can Triple In A Decade

In a report published Monday, JP Morgan analyst Sterling Auty initiated coverage of

with an Overweight rating and a price target of $216. Although Palo Alto Networks' shares have skyrocketed 130 percent over the past 12 months, there seems to be "ample upside," analyst Sterling Auty said, while saying that the company had the potential to "do what no other security vendor has done – to grow revenue faster than 30% per year for more than five years in a row." Auty believes that, with continued execution, Palo Alto Networks could generate a CAGR of about 35 percent through 2019, backed up "continued market share gains in the network security (next-generation firewall) space, increasing subscription revenue, and establishing itself as the first true security platform vendor as its endpoint security solution – called Traps – gains traction." In the report JP Morgan noted that Palo Alto Networks' market share was estimated at roughly 7 percent currently, and this could grow to 24 percent by 2024 "as companies large and small continue to migrate their network security over to next-generation firewalls – a trend we estimate is only half done." Auty believes that the evolution of malware attacks had "created an opportunity for vendors that can connect network security, security intelligence, and endpoint security to provide more of a security platform." Palo Alto Networks appears poised to "establish itself as the first successful security platform vendor," backed by organic R&D and acquisitions.