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Palo Alto Networks


What the Palo Alto Networks Upgrade Means for Mutual Fund Investors (PANW)

Shauna O'Brien Dec 22, 2014

Inside the Analyst Move

According to the analyst: “Palo Alto is our top pick for 2015. While shares are up 116% YTD (vs. +12% S&P500), we believe momentum can continue in 2015, driven in part by a shift in security spending toward vendors with comprehensive portfolios. Additionally, we believe the company’s highly differentiated products will enable win rates to remain above 85%, with ramping contributions from Wildfire and Traps. We believe the current valuation underappreciates the sustainability of these advantages and therefore raise our price target to $150 (prev $130) as we roll out to CY16 estimates.”

Hot Stock in Network Security Platform Industry

Regardless of the stock’s run up, investors should realize that its shares are quite pricey, trading at three-times the company’s price-to-earnings growth (PEG). A reasonable PEG would be around 2:1. We understand stocks in their early growth phase can sometimes surpass the most optimistic forecasts, but investors should be aware of a company’s current valuation whenever deploying capital.

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The Bottom Line

Shares of PANW are up 120% YTD.

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