Palo Alto Earnings: Vendor Consolidation Continues to Drive Palo Alto’s Top Line

We are maintaining our $366 fair value estimate for wide-moat Palo Alto Networks after the firm closed out its fourth quarter with a strong set of quarterly results and robust guidance for upcoming fiscal 2025, largely in line with our prior estimates. Much like the last couple of quarters, we were encouraged by Palo Alto’s progress in its platformization strategy as it seeks to consolidate more of its customers’ spending on its cybersecurity platforms. We believe this strategy, which dovetails with an increased customer appetite to reduce security vendor sprawl, will serve Palo Alto well in the long term despite creating near-term volatility in specific metrics such as billings. With Palo Alto shares marching up more than 10% since its last quarterly report, we view the firm’s shares as fairly priced and trading in the 3-star range.