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PANW Plunges 14% in 6 Months: Should You Hold or Fold the Stock?
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Key Takeaways
PANW's revenue growth is slowing to mid-teens, with NGS ARR growth decelerating for five straight quarters.
AI-driven platforms like Cortex XSIAM and Prisma AIRS are fueling multi-million-dollar deal wins.
Stock trades at a lower P/S ratio than peers, offering downside protection despite near-term headwinds.
Palo Alto Networks, Inc. (PANW - Free Report) shares have lost 14.5% in the past six months, underperforming the Zacks Security industry’s decline of 10%. The stock has also underperformed its industry peers and competitors, including CyberArk (CYBR - Free Report) , CrowdStrike (CRWD - Free Report) and Zscaler (ZS - Free Report) . In the past six months, shares of CyberArk and Zscaler have gained 4.7%, 28.9%, respectively, while CrowdStrike shares have lost 1.6%.
The underperformance of Palo Alto Networks’ share price raises the question: Should investors continue holding the stock or book losses?
6-Month Price Return Performance
Image Source: Zacks Investment Research
PANW’s Sluggish Sales Growth: A Key Concern
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 2025, with the company forecasting full-year revenue growth of just 14% in the range of $9.17-$9.19 billion. In the recently reported financial results for the third quarter of fiscal 2025, revenues grew 15.7% year over year. Also, in the first two quarters of the fiscal year, the growth rate had been around 14%. The Zacks Consensus Estimate for fiscal 2025 and 2026 indicates revenue growth to remain in the mid-teen percentage range.
Image Source: Zacks Investment Research
Another concern is the slowing growth of Next-Generation Security (NGS) annual recurring revenues (ARR), a key metric for Palo Alto Networks' long-term financial health. The company has reported five consecutive quarters of decelerating NGS ARR growth, with fiscal 2025 projections suggesting a further slowdown to 31-32% growth compared to the 45%+ growth in previous years. While this is still impressive, the decelerating momentum has disappointed investors, considering the rising demand for cloud security and AI-powered solutions.
Image Source: Palo Alto Networks, Inc.
Additionally, Palo Alto Networks’ $1 million-plus deals are shifting from multi-year payments to annual payments, causing the shortening of the sales cycle and affecting top-line stability. These factors, along with the United States' stance toward China, Europe and other major economies related to tariffs, have kept the stock highly volatile in recent times. However, for investors, not everything is gloom and doom.
Positive Industry Tailwinds Favor PANW’s Prospects
Despite the challenges, Palo Alto Networks is well-positioned to capitalize on the growing demand for advanced cybersecurity solutions. According to Fortune Business Insights, the global cybersecurity market is projected to expand from $193.73 billion in 2024 to $562.77 billion by 2032, representing a massive addressable market. As cyber threats become more sophisticated, enterprises are increasingly prioritizing multi-layered security platforms, which directly contribute to PANW’s strengths.
The company’s continued innovation in AI, automation and cloud security reinforces its competitive lead. AI is increasingly embedded into Palo Alto Networks’ offerings, which is helping it win multi-product deals through platforms like Cortex XSIAM and Prisma. Palo Alto Networks recently launched Prisma AI-Ready Security (Prisma AIRS), which aims to protect AI models from build to deployment across hybrid and multi-cloud setups. Just weeks after launch, Prisma AIRS has already built an eight-figure sales pipeline.
Palo Alto Networks’ transition to a platform-based model has been a game-changer. By bundling multiple security products into a comprehensive cybersecurity platform, the company generates recurring revenue streams, boosting financial stability and customer stickiness. In the last reported quarter, the company added more than 90 new platformized deals. This included three multi-million-dollar deals worth $90 million, $46 million and $32 million for its Cortex XSIAM. Multi-platform customers grew nearly 70% year over year, while those using Cortex tripled in the third quarter.
Moreover, XSIAM’s annual recurring revenues increased 200% year over year, and with AI infrastructure spending projected to exceed $300 billion in the next 12 months, Palo Alto Networks is well-positioned to capitalize on this trend.
Additionally, the pending acquisition of CyberArk would strengthen Palo Alto Networks’ foothold in a category where it currently lacks scale. PANW has already built out capabilities in endpoint and network security through its Cortex and Prisma platforms. However, identity-driven threat protection has remained a weaker link. By integrating CyberArk’s capabilities, Palo Alto Networks would be able to deliver a more comprehensive, unified platform that spans cloud, endpoint, network and identity protection.
PANW Stock Trades at Discount Valuation
Palo Alto Networks is currently trading at a low price-to-sales (P/S) multiple compared to the industry. PANW’s forward 12-month P/S ratio sits at 10.62X, lower than the industry’s forward 12-month P/S ratio of 11.51X.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Palo Alto Networks stock also trades at a lower P/S multiple compared with other industry peers, including CyberArk, CrowdStrike and Zscaler. At present, CyberArk, CrowdStrike and Zscaler have P/S multiples of 13.39X, 19.91X and 13.12X, respectively.
Conclusion: Hold PANW Stock for Now
Palo Alto Networks remains a leader in cybersecurity, with continued AI-driven innovation and a shift toward a more predictable recurring revenue model. However, slowing revenues and NGS ARR growth rates suggest that near-term upside may be limited.
Despite these headwinds, Palo Alto Networks’ discounted valuation offers some downside protection. This discounted pricing makes PANW an attractive long-term hold, particularly for investors seeking exposure to cybersecurity growth at a fair price.
Image: Bigstock
PANW Plunges 14% in 6 Months: Should You Hold or Fold the Stock?
Key Takeaways
Palo Alto Networks, Inc. (PANW - Free Report) shares have lost 14.5% in the past six months, underperforming the Zacks Security industry’s decline of 10%. The stock has also underperformed its industry peers and competitors, including CyberArk (CYBR - Free Report) , CrowdStrike (CRWD - Free Report) and Zscaler (ZS - Free Report) . In the past six months, shares of CyberArk and Zscaler have gained 4.7%, 28.9%, respectively, while CrowdStrike shares have lost 1.6%.
The underperformance of Palo Alto Networks’ share price raises the question: Should investors continue holding the stock or book losses?
6-Month Price Return Performance
Image Source: Zacks Investment Research
PANW’s Sluggish Sales Growth: A Key Concern
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 2025, with the company forecasting full-year revenue growth of just 14% in the range of $9.17-$9.19 billion. In the recently reported financial results for the third quarter of fiscal 2025, revenues grew 15.7% year over year. Also, in the first two quarters of the fiscal year, the growth rate had been around 14%. The Zacks Consensus Estimate for fiscal 2025 and 2026 indicates revenue growth to remain in the mid-teen percentage range.
Image Source: Zacks Investment Research
Another concern is the slowing growth of Next-Generation Security (NGS) annual recurring revenues (ARR), a key metric for Palo Alto Networks' long-term financial health. The company has reported five consecutive quarters of decelerating NGS ARR growth, with fiscal 2025 projections suggesting a further slowdown to 31-32% growth compared to the 45%+ growth in previous years. While this is still impressive, the decelerating momentum has disappointed investors, considering the rising demand for cloud security and AI-powered solutions.
Image Source: Palo Alto Networks, Inc.
Additionally, Palo Alto Networks’ $1 million-plus deals are shifting from multi-year payments to annual payments, causing the shortening of the sales cycle and affecting top-line stability. These factors, along with the United States' stance toward China, Europe and other major economies related to tariffs, have kept the stock highly volatile in recent times. However, for investors, not everything is gloom and doom.
Positive Industry Tailwinds Favor PANW’s Prospects
Despite the challenges, Palo Alto Networks is well-positioned to capitalize on the growing demand for advanced cybersecurity solutions. According to Fortune Business Insights, the global cybersecurity market is projected to expand from $193.73 billion in 2024 to $562.77 billion by 2032, representing a massive addressable market. As cyber threats become more sophisticated, enterprises are increasingly prioritizing multi-layered security platforms, which directly contribute to PANW’s strengths.
The company’s continued innovation in AI, automation and cloud security reinforces its competitive lead. AI is increasingly embedded into Palo Alto Networks’ offerings, which is helping it win multi-product deals through platforms like Cortex XSIAM and Prisma. Palo Alto Networks recently launched Prisma AI-Ready Security (Prisma AIRS), which aims to protect AI models from build to deployment across hybrid and multi-cloud setups. Just weeks after launch, Prisma AIRS has already built an eight-figure sales pipeline.
Palo Alto Networks’ transition to a platform-based model has been a game-changer. By bundling multiple security products into a comprehensive cybersecurity platform, the company generates recurring revenue streams, boosting financial stability and customer stickiness. In the last reported quarter, the company added more than 90 new platformized deals. This included three multi-million-dollar deals worth $90 million, $46 million and $32 million for its Cortex XSIAM. Multi-platform customers grew nearly 70% year over year, while those using Cortex tripled in the third quarter.
Moreover, XSIAM’s annual recurring revenues increased 200% year over year, and with AI infrastructure spending projected to exceed $300 billion in the next 12 months, Palo Alto Networks is well-positioned to capitalize on this trend.
Additionally, the pending acquisition of CyberArk would strengthen Palo Alto Networks’ foothold in a category where it currently lacks scale. PANW has already built out capabilities in endpoint and network security through its Cortex and Prisma platforms. However, identity-driven threat protection has remained a weaker link. By integrating CyberArk’s capabilities, Palo Alto Networks would be able to deliver a more comprehensive, unified platform that spans cloud, endpoint, network and identity protection.
PANW Stock Trades at Discount Valuation
Palo Alto Networks is currently trading at a low price-to-sales (P/S) multiple compared to the industry. PANW’s forward 12-month P/S ratio sits at 10.62X, lower than the industry’s forward 12-month P/S ratio of 11.51X.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Palo Alto Networks stock also trades at a lower P/S multiple compared with other industry peers, including CyberArk, CrowdStrike and Zscaler. At present, CyberArk, CrowdStrike and Zscaler have P/S multiples of 13.39X, 19.91X and 13.12X, respectively.
Conclusion: Hold PANW Stock for Now
Palo Alto Networks remains a leader in cybersecurity, with continued AI-driven innovation and a shift toward a more predictable recurring revenue model. However, slowing revenues and NGS ARR growth rates suggest that near-term upside may be limited.
Despite these headwinds, Palo Alto Networks’ discounted valuation offers some downside protection. This discounted pricing makes PANW an attractive long-term hold, particularly for investors seeking exposure to cybersecurity growth at a fair price.
Currently, Palo Alto Networks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.