To The Moon

$Palo Alto Networks(PANW)$ is scheduled to announce fiscal Q1 2025 earnings results on Wednesday, 20 November 2024, after market close.

In the fourth quarter of fiscal 2024, Palo Alto topped consensus estimates, bolstered by an increase in its subscription and support revenue. On a per-share basis, the company reported earnings of $1.51, which was more than the consensus estimate of $1.41, while quarterly revenue of $2.19B (+12.8% Y/Y) beat estimates by $40M.

For this reporting quarter, market is expecting PANW to report a quarterly EPS Estimate of $1.48 (+6.5% Y/Y) on revenue of $2.12B (+11.6% Y/Y). The company's management transitioned guidance to an RPO (remaining performance obligation) basis and guided for 19% to 20% growth for both fiscal first quarter 2025, and fiscal year 2025.

This is something we could watch whether PANW could achieve the obligation amidst the challenges from smaller cybersecurity provider incumbents.

Investors will be paying attention to FCF and RPO (Remaining Performance Obligations) guidance. Investors will be paying attention given that the company has shifted from billings to RPOs and ARRs (Annual Recurring Revenue), accelerating consolidation on its unified AI-powered cybersecurity platform.

Growing Adoption Of PANW Multiple Products Would Benefit From Cybersecurity Budget Increase

Firms in the technology sector spend the most on cybersecurity, with 9.5% of their IT budget.  Targeted ransomware attacks are a cybersecurity trend to watch out for. 

PANW is benefiting from growing adoption of its multiple products as more of their customers adopt all 3 of the company's pillars. Next Generation Security continues to be a standout performer, propelled by strong growth in Prisma Cloud, Prisma SASE, and Cortex.

Information security spending

In 2023, information security spending was $176 billion, and is expected to surpass $200 billion in 2024. By 2030, it's expected to be more than $300 billion. 

Global information security spending

Gartner forecasts that global information security spending will reach $183.9 billion in 2024, and $212 billion in 2025. 

Cybersecurity market revenue

Statista projects that the cybersecurity market will reach $185.70 billion in 2024, with security services dominating the market. 

Cybersecurity cost predictions

Cybersecurity Ventures estimates that worldwide cybercrime costs will hit $10.5 trillion annually by 2025. 

Security services spending

Gartner forecasts that security services spending will total $90 billion in 2024, an increase of 11 percent from 2023. 

Integrated Platforms With AI For Future Cybersecurity Needs

Palo Alto CEO Nikesh Arora expressed on LinkedIn that the future of cybersecurity hinges on integrated platforms that utilize AI for quicker and more effective security outcomes.

This shift could eventually make point solutions obsolete if taken to the extreme. As budgets tighten, the appeal of point solutions diminishes, we are also seeing companies look to invest in broader platform solutions that are already entrenched in their existing environment.

If we were to look at the acquisitions valued over $100 million in the cybersecurity space, the acquisition focused on companies with between 10 and 50 customers, these companies are basically chosen for their teams and products,

For companies which offered “product-only”, the median acquisition price is between ~$200 million to $300 million over the past year.

So we need to take note of the rise of “platformization”, this rise would not reduce the dynamic we are seeing growing in cybersecurity, there will never be few vendors controlling cybersecurity business completely.

One more thing to note is there will always be new areas for innovation and attack vectors, so these will drive more and more people to get into startup creation, and innovation to help protect businesses from new threats in cybersecurity.

Palo Alto innovation to have AI into their company might be something we need to look out for.

Technical Analysis - MACD and Multi-timeframe (MTF)

PANW have been trading above the short-term and long-term MA, though we can see that there is a decline experienced though market is trading mixed.

This might be something how PANW behave before its earnings as seen in August when it report the fiscal Q4 2024, there is a small consolidation and once the earnings beat estimates, we can see a nice upside move for the stock price.

MACD is showing that it is waiting to form a new crossover, so if earnings beat estimates, we might see a bullish MACD crossover, and MTF is not giving any upward trend, but from the chart, we should be expecting a potential upside.

Summary

I would think that as companies moved to look for cybersecurity providers with platform, PANW plan to have an AI enabled platform would make them in a good stand, especially now focus is in information security as Generative AI continue to grow.

How fast and well can a platform catch any attach on the information would be key to any companies doing Generative AI development.

I would be watching PANW to see if I can do a swing trade,

Appreciate if you could share your thoughts in the comment section whether you think PANW would be able to post an earnings beat with a much better RPO .

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.