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PANW – Market expectations are for Uniform ROA to improve, but management may have concerns about growth, cloud security, and XSOAR

June 28, 2021

  • Palo Alto Networks, Inc. (PANW:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 66.6x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about growth rates, their cloud security platforms, and the XSOAR product
  • Specifically, management may have concerns about the deal sizes for XSOAR, the proportion of customers buying multiple cloud platforms, and low annualized recurring revenue from cloud-delivered security services. In addition, they may lack confidence in their ability to maintain high growth rates and achieve billings targets. Also, they may be overstating the cybersecurity capabilities of Unit 42 and Crypsis, along with the sustainability of the strong performance of NetSec. Furthermore, they may lack confidence in their ability to utilize operating leverage, capitalize on portfolio growth opportunities, and focus on improving strategic partnership capabilities. Moreover, management may have concerns about the sustainability of strong demand, XDR coverage, and their capacity to continue winning new customers