5 Reasons Palo Alto Networks Is A New Buy At Wunderlich

Wunderlich’s Rob Breza believes that Palo Alto Networks Inc PANW continues to gain robust market share, along with solid growth and margin expansion.

Breza upgraded the rating on the company from Hold to Buy, with a price target of $190, which represents 27 percent upside from the current stock valuation.

Market Share

“PANW’s strong market share gains are embedded in its next-generation platform security approach, which provides an evolving framework for prevention, detection, and remediation of threats,” the analyst mentioned.

Breza pointed out that Palo Alto Networks has 9 percent market share, which offers the company a significant runway, given that the company’s TAM is expected to continue to grow from $18.2 billion in 2018 to $22.1 billion in 2019.

The company has been able to grow its revenues to $1.15 billion, implying 56 percent year on year growth, over the past 12 months.

“Highly Visible Model”

The analyst also noted that subscription services contributed about 59 percent of the company’s total billings for FY15, with subscription billings growing more than 70 percent, “which creates a highly visible model for a company which boasts more than 30,000 customers.”

Breza believes that Palo Alto Networks’ long term business model is attractive, with the company in a “high growth mode” that indicates revenue growth of more than 30 percent with 100-200 bps margin expansion each year for the next several years.