Palo Alto Networks Back In The Market's Good Graces, And Outperformance Is Getting Harder

I really can't complain about how Palo Alto Networks (PANW) has been performing since my last piece on the company in late September. At the time, a sales force reorganization and probably just some of the regular "hiccups" that go with any business led at least some sell-side analysts to try get ahead of the curve and call that the beginning of the end for traditional network security vendors like Palo Alto. Since then, the shares have risen about 40% - less than Fortinet (FTNT) and CyberArk (CYBR), but good enough to pull the jerseys of Check Point (CHKP) and FireEye (FEYE) up over their heads and give them a good pummeling - while year-over-year product revenue growth has re-accelerated from 1% (in FQ3'17) and 11% (in FQ4'17) to over 30% in this last quarter.

I'm less bullish on Palo Alto shares now, but only because of the growth expectations that the Street is now taking for granted. I like the company's two recent acquisitions and its ongoing efforts to expand its capabilities in areas like endpoint security and public cloud. Likewise, I think Palo Alto has the right "corporate DNA" to continue evolving, whereas Check Point more and more looks like a living fossil. Although I wouldn't chase the shares up here, this is definitely a name I'd reconsider on a pullback.

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Palo Alto Networks Back In The Market's Good Graces, And Outperformance Is Getting Harder