Exceptional Growth And Aggressive Evolution Still Drive Palo Alto Networks

Palo Alto (PANW) is a case-in-point as to why I don’t like to sell stocks just because they look expensive. Good companies, particularly those with a knack for disruptive innovation, have a way of driving ongoing growth above and beyond what seems reasonable to expect. In the case of Palo Alto, ongoing excellence in execution and a strong security market have led to another 17% move in the shares since my last update on the company. Nice as that is, and it handily beats the return of the NASDAQ over that time, it’s well short of what Fortinet (FTNT) and Check Point (CHKP) have delivered, and Fortinet and CyberArk (CYBR) have likewise outperformed Palo Alto on a trailing one-year basis.

Just as selling a strong growth stock because it looks “expensive” can be a regrettable mistake, so too can rushing to make up for lost time and over-correcting. I like the outperformance Palo Alto has been showing, I’m intrigued by the potential of Application Framework, and I think new CEO Nikesh Arora certainly has the right experience to transition Palo Alto into a new hybrid cloud world of security. But I also want to keep some semblance of sanity when it comes to valuation; even though Palo Alto’s potential growth rate for fiscal 2019 would argue for an even higher multiple than it currently sports.

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Exceptional Growth And Aggressive Evolution Still Drive Palo Alto Networks