Palo Alto Networks Plunges 14% in a Month: Time to Hold Tight or Exit?

Palo Alto Networks’(PANW) shares have lost 14.4% over the past month, underperforming the Zacks Security industry’s decline of 11.3%. The stock has also underperformed its industry peers and competitors, including CheckPoint Software (CHKP), SentinelOne (S) and Okta Inc (OKTA). In the past month, shares of CheckPoint Software, Sentinel One and Okta Inc have lost 3.9%, 9% and 11.1%, respectively.

One-month Price Return Performance

The underperformance of Palo Alto Networks’ shares raises the question: Should investors continue holding PANW stock or exit the investment?

What’s Behind the Recent Plunge in PANW Stock?

Palo Alto Networks' recent underperformance can be attributed to investors' concerns about the company’s aggressive investments in acquiring new businesses. In mid-November, the company announced its agreement to buy Chronosphere at a hefty premium price. The consideration price of $3.35 billion is around 21 times Chronosphere’s annual recurring revenue (ARR) of around $160 million.

The announcement also came at a time when Palo Alto Networks is already in the midst of a much bigger deal, which involves buying CyberArk Software for about $25 billion, which is expected to close by the second half of fiscal 2026. Seeing both deals together might have caused investors to question whether the company is using its money wisely and whether it can manage two large acquisitions at the same time.

On top of that, Palo Alto Networks is experiencing a slowdown in its revenues and Next-Generation Security (NGS) ARR, which might have caused concerns among the investors regarding the company’s future prospects.

Slowing Sales Growth Hurts PANW’s Prospects

Palo Alto Networks is experiencing a slowdown in its sales growth. Notably, the company’s revenue growth rate has been in the mid-teen percentage range over the past year, a sharp contrast from the mid-20s percentage in fiscal 2023.

This deceleration is expected to continue into fiscal 2026, with the company forecasting full-year revenue growth in the range of 14-15%. In the recently reported financial results for the first quarter of fiscal 2026, revenues grew 16% year over year. The Zacks Consensus Estimate for fiscal 2026 and 2027 indicates revenue growth to remain in the mid-teen percentage range.

Another concern is the slowing growth of NGS ARR, a key metric for Palo Alto Networks' long-term financial health. The company has reported six consecutive quarters of decelerating NGS ARR growth. Furthermore, for fiscal 2026, Palo Alto Networks expects NGS ARR in the range of $7.00-$7.10 billion, suggesting a further slowdown to 26-27% growth compared to the 32% growth in fiscal 2025 and 45%+ in fiscal 2024.

While this is still impressive, the decelerating momentum has disappointed investors, considering the rising demand for cloud security and AI-powered solutions.

Valuation: PANW Trades Higher Than Peers

Palo Alto Networks is currently trading at a lower price-to-sales (P/S) multiple compared to the industry. PANW’s forward 12-month P/S ratio sits at 12.06X, slightly lower than the industry’s forward 12-month P/S ratio of 12.18X.

PANW Forward 12-Month P/S Ratio

Palo Alto Networks stock trades at a higher P/S multiple compared with other industry peers, including CheckPoint Software, Sentinel One and Okta Inc. At present, CheckPoint Software, Sentinel One and Okta Inc have P/S multiples of 7.13X, 4.61X and 4.53X, respectively.

Key Technical Indicator Signals Bearish Trend for PANW

Palo Alto Networks shares have dipped below their 50-day & 200-day moving averages, a bearish technical signal that indicates the potential for continued downward pressure in the short term.

PANW 50-Day & 200-day Simple Moving Average

Conclusion: Sell PANW Stock Right Now

Palo Alto Networks remains a leader in cybersecurity, with a strong long-term growth trajectory, continued AI-driven innovation and a shift toward a more predictable recurring revenue model. However, slowing revenue and NGS ARR growth rates suggest that near-term upside may be limited. Moreover, the company’s recent acquisition, along with its premium valuation, warrants a cautious approach to the stock.

Currently, Palo Alto Networks carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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