Palo Alto Networks, Inc. (PANW): A Bull Case Theory

We came across a bullish thesis on Palo Alto Networks, Inc. on Disruptive analytics’s Substack by Magnus Ofstad. In this article, we will summarize the bulls’ thesis on PANW. Palo Alto Networks, Inc.'s share was trading at $209.30 as of October 2nd. PANW’s trailing and forward P/E were 130.81 and 54.95 respectively according to Yahoo Finance.

Palo Alto Networks (PANW) continues to assert its leadership in cybersecurity, reporting 16% year-over-year revenue growth in Q4 fiscal 2025, with annual recurring revenue (ARR) rising 32%, confirming the effectiveness of its platformization strategy. Remaining performance obligations (RPO) also grew 24%, signaling strong future revenue visibility. These results enabled PANW to deliver fiscal 2026 guidance above Wall Street consensus, driving a positive market reaction. The cybersecurity landscape is experiencing significant vendor consolidation, as customers increasingly prefer a single comprehensive provider rather than managing multiple vendors.

PANW is well-positioned to capitalize on this trend, leveraging its scale and financial flexibility. Its $25 billion acquisition of CyberArk strengthens the company’s presence in the rapidly growing identity security sector, particularly in privileged access management (PAM), which safeguards high-risk credentials and privileged accounts—a critical area often under-addressed by traditional security solutions. Integrating CyberArk’s PAM platform with PANW’s AI-powered security products creates a robust, end-to-end portfolio covering human, machine, and AI identities, enhancing both security efficacy and customer retention.

The acquisition is expected to be immediately accretive to revenue growth and gross margins, with synergies driving free cash flow per share by fiscal 2028. PANW now offers a comprehensive solution set spanning endpoints, networks, cloud, AI, and identity, fully aligned with its platform strategy. While integration carries inherent challenges, the CyberArk deal reinforces PANW’s competitive moat, supporting long-term growth and engagement. With strong fundamentals, high ARR growth, and strategic expansion into identity security, PANW presents a compelling investment, with near-term upside potential for the stock to exceed $200, reflecting market confidence in its platform-driven strategy.

Previously we covered a bullish thesis on Palo Alto Networks, Inc. (PANW) by Magnus Ofstad in October 2024, which highlighted the company’s platformization strategy, AI-driven innovations, and strong ARR growth. The company's stock price has depreciated approximately by 42.59% since our coverage due to market volatility and valuation pressures. The thesis still stands, and Magnus Ofstad shares a similar perspective but emphasizes the CyberArk acquisition and identity security expansion.

Palo Alto Networks, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 77 hedge fund portfolios held PANW at the end of the second quarter which was 77 in the previous quarter. While we acknowledge the potential of PANW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.