Specialist Jonathan Cartu Reports - Palo Alto Networks: Overlooked Growth Opportunities... - Jonathan Cartu Computer Repair Consultant Services
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Specialist Jonathan Cartu Reports – Palo Alto Networks: Overlooked Growth Opportunities…

Palo Alto Networks: Overlooked Growth Opportunities...

Specialist Jonathan Cartu Reports – Palo Alto Networks: Overlooked Growth Opportunities…

Palo Alto Networks (NYSE:PANW) is a leader in on-premise network security and is well positioned to be a leader in cloud-based network security. The market does not appear to appreciate the growth potential of Palo Alto Networks’ next-gen security products and the stock appears undervalued as a result. Palo Alto Networks should reward shareholders over the long term provided it can continue to successfully roll out new services without adversely impacting its legacy business.


Palo Alto Networks provides a range of on-premise and cloud-based solutions across network and endpoint security. The company estimates that its total addressable market will be approximately $72 billion in 2022 with the cloud market and analytics driving growth.

Table 1: Palo Alto Networks Target Markets

(Source: Created by author using data from Palo Alto Networks)

Fortinet (NASDAQ:FTNT) estimates a similar market opportunity for network security with services like web gateways and Software Defined Wide Area Networks (SD-WAN) becoming increasingly important.

Figure 1: Network Security Market

(Source: Fortinet)

A market opportunity has been created by the growth in web gateways and SD-WANs and the replacement of hardware firewalls with virtual firewalls and Firewall-as-a-Service (FWaaS). Palo Alto Networks must successfully compete against cloud native vendors like Zscaler (NASDAQ:ZS) in these new markets as growth is stagnating in its traditional businesses.

Figure 2: Network Security Consumption Model

(Source: Fortinet)

Palo Alto Networks

Palo Alto Networks offers a suite of products and services across network security, cloud security and security operations. The company has segmented its solutions based on these groups:

  • “Secure the Enterprise”: On-premise solutions
  • “Secure the Cloud”: Cloud-based solutions
  • “Secure the Future”: Security operations driven by automation and analytics

Secure the Enterprise

Secure the Enterprise refers to Palo Alto Networks’ enterprise network security solutions like firewalls. These solutions aim to increase security by controlling access for each user to each application while requiring fewer inline devices.


Palo Alto Networks was an innovator in next-generation firewalls (application-level inspection in addition to basic port/protocol inspection), and its firewall solutions continue to evolve over time with the aim of creating consistency across software and hardware.

The company is projecting its firewall revenue will continue to be dominated by hardware in coming years which represents a risk to investors, although software will become increasingly important. Palo Alto Networks is well positioned to succeed as the cybersecurity landscape changes, but the overall financial impact could be muted or even negative if its legacy business is cannibalized.

Figure 3: Palo Alto Networks Firewall-as-a-Platform Billings

(Source: Palo Alto Networks)

Table 2: Secure the Enterprise Strategy

(Source: Created by author using data from Palo Alto Networks)

Securing the Cloud

Securing the Cloud refers to Palo Alto Networks’ solutions which secure access to the cloud and secure applications running in the cloud. If cloud security is approached using point solutions, it can result in significant complexity as each solution tries to address every tech stack.

Figure 4: Complexity Created by Point Solutions Addressing Multiple Tech Stacks

(Source: Palo Alto Networks)

Palo Alto Networks aims to eliminate these point solutions by offering an integrated service across CI/CD, VMs, containers, serverless and PaaS, which can reduce complexity, enhance security and potentially reduce costs.

Figure 5: Prisma Access

(Source: Palo Alto Networks)

Table 3: Secure the Cloud Strategy

(Source: Created by author using data from Palo Alto Networks)

Securing the Future

Palo Alto Networks’ Securing the Future solutions aim to utilize data, analytics and automation to reduce the number of false positive alerts, improve response time to alerts and improve customer security posture. This is done by collecting quality data across a range of sources (endpoint, network and cloud) and applying advanced analytics to improve predictions and drive automation.

Figure 6: Importance of Good Data for Analytics

(Source: Palo Alto Networks)

Palo Alto Networks’ Cortex service sits at the center of the effort to collect and analyze data using a data lake fed by other services like cloud security, network security and endpoint protection.

Figure 7: Palo Alto Networks Cortex Service

(Source: Palo Alto Networks)

Figure 8: Importance of Cross-Source Analytics for Reducing Noise

(Source: Palo Alto Networks)

Cortex XDR (extended detection and response) enhances security operations by analyzing integrated data which reduces the alert volume allowing faster responses.

Figure 9: Palo Alto Networks Cortex XDR Service

(Source: Palo Alto Networks)

Figure 10: Importance of Automation for Outcomes

(Source: Palo Alto Networks)

Figure 11: Palo Alto Networks Next-Generation Endpoint Protection

(Source: Palo Alto Networks)

Table 4: Secure the Future Strategy

(Source: Created by author using data from Palo Alto Networks)

Palo Alto Networks can add value in this segment with its integrated suite of services by collecting data across a broader range of sources than point solutions like Zscaler or CrowdStrike (NASDAQ:CRWD) enabling improved analytics.

PANW is putting significant effort into positioning itself for success in the future and next-gen security billings are driving almost all of its current revenue growth. Recent initiatives include:

  • Acquisitions: M&A is a large part of Palo Alto Networks’ strategy. Given the importance of capturing market share as enterprises shift to the cloud, this makes sense, and the company’s large customer base and sales force should allow it to quickly generate value. Recent acquisitions include:

– Twistlock (container security and cloud native security)

– PureSec (serverless security)

– Genix (SD-WAN)

– Demisto (automated incident response)

– evident.io (cloud security and compliance automation)

– RedLock (cloud security and compliance automation)

– SECDO (endpoint detection and response)

– Cyvera (advanced endpoint protection)

– Lightcyber (automated behavioral analytics)

Figure 12: Palo Alto Networks M&A Integration Timeline

(Source: Palo Alto…

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