PANW Stock: Is Palo Alto Networks, Inc. the Next Cisco Systems, Inc.?

PANW StockWhy PANW Stock Has Strong Momentum Now

Cybersecurity is big business and Palo Alto Networks, Inc. (NYSE:PANW) has both the operating and share price momentum to do great in 2016. Plus, this is on the back of a number of years of seriously good top-line growth for PANW stock. Could it be the next Cisco Systems, Inc. (NASDAQ:CSCO)? It’s possible.

The company just reported another great quarter and Wall Street earnings estimates for upcoming periods have been going up across the board.

In a slow-growth world with few genuine growth businesses in the marketplace, institutional investors are all over names like PANW stock. Sure, this position is pricey and it’s susceptible to big price movements on the stock market, but it’s consistently beating the Street, raising its outlook and delivering what investors want.

Cybersecurity is a growth business and while there are a number of successful players in the industry, Palo Alto Networks has the size and scale to keep on producing excellent financial growth.

The chart for PANW stock is featured below:

Palo Alto Networks Chart

Chart courtesy of www.StockCharts.com

Why Palo Alto Networks, Inc. Can Keep Its Share Price Momentum

This company is a top-line growth story. It’s what investors have been paying for, but this business is about to transition to profitability and the bottom line is what’s going to take the stock to the next level.

Based in Santa Clara, California, this firm has some 21,000 customers in the energy, education, financial services, government, healthcare, media, and telecommunications industries, selling firewall and related technology.

This stock recently popped higher after the company announced another solid quarter of comparable growth. In its first fiscal quarter of 2016 (ended October 31, 2015), Palo Alto Networks produced a 55% comparable gain in its quarterly revenues to hit a record $297.2 million. Total billings grew 61% comparatively to $388 million.

This business is still producing a loss (GAAP net loss of $38.7 million, or $0.45 per diluted share in the most recent quarter), but the company is investing a tremendous amount in both sales and marketing and new research and development, albeit to a lesser extent in the latter, which is producing results.

Non-GAAP earnings in the most recent quarter were $31.6 million, or $0.35 per diluted share, compared to $12.8 million, or $0.15 per diluted share, in the year-ago period, according to the company. The current quarter is expected to see comparable sales growth of between 44% and 46%. Palo Alto Networks has approximately $760 million in cash and short-term investments, so it shouldn’t need to sell shares to the market for a while.

In fact, this position would benefit from a share split. Current estimates for this fiscal year are about 43% in total sales growth over last year, with another 31% in top-line growth expected for the company’s next fiscal year.

PANW stock continues to deliver the goods in what is a robust subsector of the information technology industry. A market correction would certainty take some of the wind out of this position, but the company’s top-line growth is real. As improving profitability takes hold in calendar 2016, I see no reason why this position can’t still be a winner for investors.

Stay in the loop. Follow Mitchell on Facebook and Twitter.