Palo Alto Gains Market Share; Growth Approach Should Push Shares Higher

Wunderlich’s Bill Choi believes Palo Alto Networks Inc PANW has been improving its security platform, in an attempt to address the growing demand for hybrid cloud environments, protection related to SaaS applications, as well as protection against credential theft and abuse.

The analyst maintains a Buy rating on the company, with a price target of $190.

Driving Growth

Choi mentioned that Palo Alto issued four press releases on February 7 to discuss “1) the latest improvements in its operating system (PAN-OS version 8.0), 2) new hardware appliances for enterprise data centers and branches (PA-5200, 800, 200 series), 3) expanded virtual appliances for cloud, remote office and micro-segmentation use-cases.”

The analyst views these announcement as “mostly incremental,” while indicating why existing customers are likely to expand their business with the company.

“We believe customers are increasingly seeking next-gen firewall capabilities when they migrate to the cloud due to shared responsibility model. We also believe there is significant base of traditional firewalls that need to be upgraded,” Choi explained.

Capturing The Market

In addition, the analyst noted that virtual applications were crucial to capturing the incremental spend due to cloud migration, with system integrators suggesting that cloud migration was beginning to prove to be a tailwind, since customers now better understand what tools are required and how the cloud environment can be secured.

Choi also expects the enhancements to PAN-OS to drive the uptake of WildFire, while pointing out that Palo Alto was improving the sandboxing capabilities of WildFire to speed up detection of stolen credentials, preventing the use of stolen credentials and blocking credential submissions to phishing sites.

“We believe PANW market share gains, balanced revenue and operating margin approach to growth should drive significant price appreciation,” the analyst added.