Palo Alto Networks Looks Too Cheap Due to Its Strong FCF - Short Put Plays are Attractive

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Palo Alto Networks (PANW) stock looks way too cheap here. This is based on its strong free cash flow (FCF) and FCF margins. Its adj. FCF was up 7.5% YoY and FCF margins are high at 38.8%. This makes ...

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This makes ...</p>\n\n<a href=\"https://www.barchart.com/story/news/25489612/palo-alto-networks-looks-too-cheap-due-to-its-strong-fcf-short-put-plays-are-attractive\">Source Link</a>\n\n</div>\n","source":"barchart_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Palo Alto Networks Looks Too Cheap Due to Its Strong FCF - Short Put Plays are Attractive</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPalo Alto Networks Looks Too Cheap Due to Its Strong FCF - Short Put Plays are Attractive\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-16 01:04 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.barchart.com/story/news/25489612/palo-alto-networks-looks-too-cheap-due-to-its-strong-fcf-short-put-plays-are-attractive><strong>Barchart</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Palo Alto Networks (PANW) stock looks way too cheap here. This is based on its strong free cash flow (FCF) and FCF margins. Its adj. FCF was up 7.5% YoY and FCF margins are high at 38.8%. This makes ...</p>\n\n<a href=\"https://www.barchart.com/story/news/25489612/palo-alto-networks-looks-too-cheap-due-to-its-strong-fcf-short-put-plays-are-attractive\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4099","symbol_name":"汽车制造商","start_time":0,"source_url":"https://www.barchart.com/story/news/25489612/palo-alto-networks-looks-too-cheap-due-to-its-strong-fcf-short-put-plays-are-attractive","article_id":"2427088184","we_media_id":null,"thumbnails":["https://media.barchart.com/contributors-admin/common-images/images/Tech%20(Ecommerce%2C%20Social%20Media%2C%20etc.)/code%20on%20computer%20screen%20java%20html.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2427088184","pubTimestamp":1713200689,"sourceInfo":{"source_id":"barchart_highlight","name":"Barchart"},"weMediaInfo":null,"summary":"Palo Alto Networks  stock looks way too cheap here. This is based on its strong free cash flow  and FCF margins. Its adj. FCF was up 7.5% YoY and FCF margins are high at 38.8%. This makes short-put plays attractive here both as an income play and a way to buy in cheaply.As of morning trading on Monday, April 15, PANW is at $275.05, down 26% from its recent peak of $371.97 on Feb. 12. The stock is now near its lows after the Feb. 20 release of its fiscal Q2 earnings for the quarter ending Jan. 31.But that report, although disappointing to investors showed to investors that the cyber security software company's free cash flow  was still strong. Based on my analysis the stock could be worth over $360 per share, as much as $368 per share in the next year. That is over 33% higher than today.The bottom line is that PANW stock looks way too cheap here and there is a good consensus among analysts, as well as from evidence of its high FCF margins.","collect":0,"end_time":0,"defaultTopTitle":"barchart.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4099":"汽车制造商","LU2286300806.USD":"Allianz Cyber Security AT Acc USD","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","FCF":"第一联邦金融","LU1917777945.USD":"安联专题基金Cl AT Acc","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4532":"文艺复兴科技持仓","STLA":"Stellantis NV","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU2106854487.HKD":"ALLIANZ THEMATICA \"AMG\" (HKD) INC","BK4585":"ETF&股票定投概念","LU2125909759.SGD":"Natixis Thematics Safety H-R/A SGD","BK4523":"印度概念","BK4534":"瑞士信贷持仓","LU2265009873.SGD":"Eastspring Investments - Global Growth Equity AS SGD-H","LU2125909916.SGD":"Natixis Thematics Safety R/A SGD","LU2023250504.SGD":"Allianz Thematica Cl AMg DIS H2-SGD","LU1989764664.SGD":"CPR Invest - Global Disruptive Opportunities A2 Acc SGD-H","BK4211":"区域性银行","LU2023250843.SGD":"Allianz Thematica Cl AT Acc H2-SGD","PANW":"Palo Alto Networks","LU1923622291.USD":"Natixis Thematics Safety R/A USD","LU1989764748.USD":"东方汇理环球颠覆性机遇A2 Acc","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","TTM":"塔塔汽车","LU1169590202.USD":"ALLSPRING (LUX)  U.S. SELECT EQUITY \"I\" (USD) ACC","LU1804176565.USD":"EASTSPRING INV GLOBAL GROWTH EQUITY \"A\" (USD) ACC","LU1169589451.USD":"ALLSPRING (LUX)  U.S. SELECT EQUITY \"A\" (USD) ACC","BK4588":"碎股","BK4550":"红杉资本持仓","LU1064927863.SGD":"JPMorgan Funds - Europe Dynamic A (acc) SGD-H","LU1974910355.USD":"Allianz Thematica Cl AMg DIS USD","BK4581":"高盛持仓","LU1861215975.USD":"贝莱德新一代科技基金 A2","BK4097":"系统软件","BK4560":"网络安全概念","LU1861220033.SGD":"Blackrock Next Generation Technology A2 SGD-H"},"translate_title":"Palo Alto Networks由于其强大的FCF看起来太便宜了——看跌期权很有吸引力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TTM":1,"STLA":1,"PANW":1,"FCF":1},"content_text":"Palo Alto Networks (PANW) stock looks way too cheap here. This is based on its strong free cash flow (FCF) and FCF margins. Its adj. FCF was up 7.5% YoY and FCF margins are high at 38.8%. This makes short-put plays attractive here both as an income play and a way to buy in cheaply.\nAs of morning trading on Monday, April 15, PANW is at $275.05, down 26% from its recent peak of $371.97 on Feb. 12. The stock is now near its lows after the Feb. 20 release of its fiscal Q2 earnings for the quarter ending Jan. 31.\nBut that report, although disappointing to investors showed to investors that the cyber security software company's free cash flow (FCF) was still strong. Based on my analysis the stock could be worth over $360 per share, as much as $368 per share in the next year. That is over 33% higher than today. \nFCF and FCF Margins Strong\nThe company reported that its Jan 31 quarter revenue was up 19% YoY and its FCF for the quarter was $654.8 million. Moreover, on a trailing 12-month (TTM) basis, the company made 7.5% more adj. FCF (i.e., $2.922 billion, vs $2.718 billion a year earlier).\nThis was highlighted in a recent GuruFocus article I wrote on March 6, “Why is Palo Alto Networks So Cheap?” In that article, I show that the company's FCF margins, on a TTM basis, were high at 38.8% (i.e., $2.92b adj FCF on $7.53b in TTM revenue). Therefore, assuming the company can keep generating this high level of FCF margins, its FCF should continue to move higher. For example, analysts now project revenue will rise to $8.0 billion this year ending July 31, and up to $9.16 billion by the next FY ending July 2025.\nAs a result, if its FCF margins average 39% by the end of next FY, FCF could reach $3.57 billion (i.e., 0.39 x $9.16b). That means its valuation could rise significantly from here.\nTarget Price for PANW Stock\nIf the company were to pay out 100% of its FCF as a dividend next year, PANW stock would likely end up with at least a 3.0% dividend yield. That means that if we divide $3.57 billion by 3.0%, its market cap valuation would be $119 billion. \nThat implies its market cap today of $89.3 billion would rise by over one-third to $119 billion. In other words, PANW stock is worth at least 1.338 more than its price today of $275.05, or 368.34 per share.\nThis is higher than other analysts' recent price targets, but not by much. For example, Refinitiv's survey (seen in Yahoo! Finance's summary page) of 41 analysts shows that their average price target is $336.63, or 21.8% higher. Moreover, AnaChart, a new sell-side analyst tracking service that tracks how well analysts perform, shows the average of 40 analysts is $305.19, or 13% higher.\nThe bottom line is that PANW stock looks way too cheap here and there is a good consensus among analysts, as well as from evidence of its high FCF margins.\nOne way to play this is to short out-of-the-money (OTM) put options, both as an income play and to also set a disciplined buy-in target price.\nShorting OTM Puts as an Income Play and Buy-In Price\nSince the put options for PANW stock are now high it makes sense to take advantage of this by shorting them. That way you can earn extra income if you are already a shareholder in PANW stock, and also set a buy-in price if you want to hold off until the stock falls. \nFor example, look at the May 3 expiration period, 18 days from now. Barchart's option chain shows that the $270 strike price, which is 2.76% below today's price, trades for $5.00 per put option contract on the bid side. \nThat means that a short-seller of these puts can make an immediate 2.02% put yield (i.e., $5.45 / $270.00). Here is how that works out.\n\n\n\nPANW puts expiring May 3 - Barchart - As of April 15, 2024\n\n\nIf the investor secures $27,000 with their brokerage firm, they can then enter an order to “Sell to Open” 1 put contract at $270.00. The secured $27,000 allows the account to buy 100 shares should PANW stock fall to $270.00 and the put option holder exercises his option on or before May 3.\nBut the investor gets to keep $545 (i.e., 100 x $5.00) immediately, no matter what happens. That means that his breakeven price is $270-$5.45, or $264.55 per share. This is a good buy-in entry price and 3.8% below today's price.\nYou can also see that more conservative investors can sell short the $260 strike price and receive $255 after securing $26,000 with their brokerage firm. That is a lower yield of almost 1.0% (i.e., $2.55/$260 = 0.98%). But at least there is now over a 7% lower breakeven level for the short seller.\nIf PANW stock stays flat the investor can repeat this trade. Over a quarter, it's possible that the expected return (ER) can be over $2,180 at the $270 strike price, an ER of 8.07% (i.e., $2,180/$27,000) if the same level of put yield can be achieved. Even with the lower $260 strike price, the investor can make close to 4% in 90 days.\nThe bottom line is that this is a good way to buy into this cheap stock and also gain extra income.More Stock Market News from Barchart \n\nA Contrarian Take Could Bode Well for Stellantis (STLA) Buyers\nStocks Rise but Gains Limited by Rising Bond Yields\n2 Dividend Aristocrats to Borrow from Warren Buffett's Portfolio\nStocks Climb Although Iran-Israeli Tensions Remain High\n On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2427088184"}