Should You Buy Palo Alto Networks Before Its Stock Split?

Core Insights - Cybersecurity companies are viewed differently from other software firms due to the essential nature of their products, making cybersecurity stocks attractive investments with high margins and stability [1] Company Overview - Palo Alto Networks (PANW) is a well-established player in the cybersecurity sector, having been founded in 2005, and is known for its broad product offerings and "platformization" strategy [3] - The company is transitioning clients from its legacy business model to focus on its next-generation security (NGS) platforms, which include Prisma and Cortex [4] Financial Performance - In Q1 of fiscal year 2025, Palo Alto's annual recurring revenue (ARR) for NGS grew by 40% year-over-year to $4.5 billion, although overall revenue increased by only 14$2.1 billion [5][6] - Earnings per share (EPS) rose significantly from $0.63 to$1.07, marking a 70% increase [6] Stock Split and Valuation - A 2-for-1 stock split is scheduled for December 16, aimed at making shares more accessible to employees and investors, with the current share price around $400 [7] - Palo Alto's stock trades at a premium, with a forward P/E ratio of approximately 64 and a price-to-sales ratio of 17 [7][8] Competitive Landscape - The cybersecurity market is competitive, with companies like CrowdStrike trading at higher valuations (97 times forward earnings) but focusing solely on NGS, making them potentially more attractive investments [9] - While Palo Alto is a strong contender in the cybersecurity space, it may not be the best buy compared to its competitors at this time [10]