It seems to only be a matter of time before security software companies, however well-liked they may be, take their turn at the whipping post. Often times, it is to sales force execution/transitions, but in the case of some bigger legacy players like Palo Alto (PANW) and Check Point (CHKP), recent concerns have shifted more towards weak sales of traditional firewall appliances. Given Palo Alto’s ability to offer a “firewall as a platform” approach, and considering the exceptional growth in the company’s Next Gen business, I’m not really worried if product revenue growth wobbles from quarter to quarter.
Ongoing growth in cloud has some negative near-term consequences for margins, but I’m not really worried about over the longer term. With double-digit long-term revenue growth potential and improving free cash flows, I view Palo Alto as a “the strong getting stronger” play in security, and I still think there are worthwhile returns available at this price.
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Palo Alto's Shift Towards Cloud Hasn't Been Seamless, But The Opportunity Is Still Meaningful
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