Don’t sweat the drop in Palo Alto Networks stock, which came despite a solid beat and raise after Wednesday’s closing bell. The cybersecurity company delivered strong fiscal 2025 first-quarter results, beating estimates on basically every line. It also raised full-year guidance across several key metrics. However, the recently rallying stock fell victim to profit-taking as the new outlook failed to satisfy lofty investor expectations. Revenue for Palo Alto’s quarter ending Oct. 31 increased 14% year over year to $2.14 billion, exceeding the consensus estimate of $2.12 billion that was compiled by LSEG. Adjusted earnings per share increased 13% to $1.56, ahead of the $1.48 expected. Palo Alto Networks Why we own it: We believe cybersecurity is a secular growth market as bad actors are relentless and companies simply cannot afford to not invest in defense. It is a never-ending arms race. We believe Palo Alto Networks, in particular, is uniquely positioned to win due to its best-in-class tools and a broad product portfolio that allows it to provide an all-encompassing “platform” solution to cybersecurity. Competitors : CrowdStrike (also a Club stock), Fortinet , Cisco Systems Last buy : Aug. 2, 2024 Initiation : Feb. 15, 2023 Club name Palo Alto also announced its board of directors approved a 2-for-1 forward stock split for shareholders of record on Dec. 12. The stock will begin trading at its new split-adjusted price on Dec. 16. Stock splits do not create value in the traditional sense but temporarily foster enthusiasm that can boost a stock price. Bottom line Palo Alto Networks is off to a strong start to its fiscal year 2025. Part of its success is due to the robust market for cybersecurity, especially with hackers using artificial intelligence. But another driver is the company’s push into platformization, the packaging of products and services across disciplines. It was only in February that management introduced this platformization push – and after some initial growing pains as Wall Street analysts caught up to the strategy shift, it looks like it’s been a big hit with customers. Backing this up notion is the addition of more than 70 new platformizations in the quarter, bringing the cumulative number of deals to about 1,100. Management believe they’re on track to hit their target of 2,500 to 3,500 platformizations by fiscal year 2030. Platformization is also leading to bigger deals. The company signed a transaction worth more than $50 million with a large technology firm, a more than $20 million deal with a financial services firm, a more than $15 million deal with a national hospital system, and a more than $30 million deal with a business services company. In total, Palo Alto Networks signed 305 deals in the quarter worth more than $1 million. That’s up 13% from the year-ago period. It also signed 60 deals total more than $5 million, up 30% year over year. PANW YTD mountain Palo Alto Networks YTD So, why is the stock 4.8% lower in…
Read More: Palo Alto Networks beat, raise fails to wow. But that plays into our hand