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Aug. 24, 2022, 7:24 a.m. EDT

Here’s how Palo Alto Networks stacks up against its main competitors

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By Philip van Doorn

Shares of Palo Alto Networks soared as much as 12% on Aug. 23 after the network security company reported results for its fiscal fourth quarter and said it expected sales to increase by at least 25% in fiscal 2023.

Palo Alto /zigman2/quotes/207599953/composite PANW -0.86% CEO Nikesh Arora described the company’s fiscal guidance as “prudent.” MarketWatch’s Wallace Witkowski summarized the company’s results and its recent history of beating analysts estimates and its own guidance .

Other factors that may have helped lift Palo Alto’s shares included an expansion of its buyback program and a three-for-one stock split planned for Sept. 14 .

During fiscal 2022, Palo Alto’s sales increased by 29% to $5.502 billion. The company’s gross profit increased by 27% to $3.783 billion. But that was outweighed by operating expenses totaling $3.972 billion, for an operating loss of $189 million. The diluted net loss per share for fiscal 2022 was $2.71, narrowing from a loss of $5.18 a share in fiscal 2021.

For the fourth quarter of fiscal 2022, the company was profitable, with EPS of 3 cents. It also expected to be profitable on a GAAP basis in fiscal 2023.

But from the immediate reaction, it is clear that investors are fixated on Palo Alto’s sales growth.

What about its competitors? In its annual report for fiscal 2021, Palo Alto listed five “main competitors” by name: Cisco Systems Inc. /zigman2/quotes/209509471/composite CSCO -0.51% , Check Point Software Technologies, Ltd. /zigman2/quotes/200866016/composite CHKP +0.43% , Fortinet Inc., /zigman2/quotes/205733290/composite FTNT -1.29% , Zscaler Inc. /zigman2/quotes/203585803/composite ZS -1.53% and CrowdStrike Holdings Inc. /zigman2/quotes/212513426/composite CRWD +0.97% .

FactSet lists three more “key” competitors to Palo Alto within the “network and communications hardware” space for which consensus sales estimates are available through 2024. They are included in the chart below.

How quickly are Palo Alto’s competitors expected to grow?

Palo Alto isn’t alone in having a fiscal year that doesn’t match the calendar. In order to compare its expected sales growth with its competitors, we looked at consensus estimates for calendar years 2022, 2023 and 2024 among analysts polled by FactSet.

Here are the nine companies listed by expected two-year compound annual growth rates (CAGR) for sales through 2024:

Company Ticker Two-year expected sales CAGR through 2024 Estimated sales – 2022 ($mil) Estimated sales – 2023 ($mil) Estimated sales – 2024 ($mil) Market cap. ($mil)
CrowdStrike Holdings Inc. Class A /zigman2/quotes/212513426/composite CRWD 33.9% $2,142 $2,935 $3,837 $39,670
Zscaler Inc. /zigman2/quotes/203585803/composite ZS 31.2% $1,243 $1,660 $2,140 $23,124
Palo Alto Networks Inc. /zigman2/quotes/207599953/composite PANW 21.8% $6,070 $7,462 $8,998 $50,620
Fortinet Inc. /zigman2/quotes/205733290/composite FTNT 20.8% $4,383 $5,299 $6,392 $39,678
Arista Networks Inc. /zigman2/quotes/206966450/composite ANET 12.3% $4,064 $4,634 $5,124 $38,686
Motorola Solutions Inc. /zigman2/quotes/203308192/composite MSI 6.5% $8,867 $9,416 $10,059 $41,498
Juniper Networks Inc. /zigman2/quotes/207361368/composite JNPR 4.5% $5,213 $5,501 $5,690 $9,346
Check Point Software Technologies Ltd. /zigman2/quotes/200866016/composite CHKP 4.2% $2,317 $2,427 $2,515 $15,264
Cisco Systems Inc. /zigman2/quotes/209509471/composite CSCO 4.1% $52,620 $54,930 $57,024 $197,565
Source: FactSet

Click on the tickers for more about each company. Then  read  Tomi Kilgore’s detailed guide to the wealth of information available for free on MarketWatch quote pages.

For expected sales growth over the next two calendar years, Palo Alto ranks third, with smaller competitors Crowdstrike and Zscaler taking the top two spots. The largest company on the list, Cisco Systems, brings up the rear. Then again, Cisco’s “End to End Security” segment is expected to increase sales to $4.625 billion in 2024 from $3.86 billion in 2022, for expected CAGR of 9.5%.

Leaving the companies in the same order, here’s a summary of opinion among analysts polled by FactSet:

Company Ticker Share “buy” ratings Share neutral ratings Share “sell” ratings Closing price – Aug. 22 Consensus price target Implied 12-month upside potential
CrowdStrike Holdings Inc. Class A /zigman2/quotes/212513426/composite CRWD 100% 0% 0% $185.88 $236.50 27%
Zscaler Inc. /zigman2/quotes/203585803/composite ZS 84% 16% 0% $163.00 $204.83 26%
Palo Alto Networks Inc. /zigman2/quotes/207599953/composite PANW 92% 8% 0% $508.05 $655.41 29%
Fortinet Inc. /zigman2/quotes/205733290/composite FTNT 69% 31% 0% $50.32 $71.74 43%
Arista Networks Inc. /zigman2/quotes/206966450/composite ANET 57% 39% 4% $127.14 $149.91 18%
Motorola Solutions Inc. /zigman2/quotes/203308192/composite MSI 72% 21% 7% $248.66 $286.44 15%
Juniper Networks Inc. /zigman2/quotes/207361368/composite JNPR 40% 40% 20% $28.97 $33.28 15%
Check Point Software Technologies Ltd. /zigman2/quotes/200866016/composite CHKP 41% 37% 22% $121.71 $137.77 13%
Cisco Systems Inc. /zigman2/quotes/209509471/composite CSCO 45% 52% 3% $47.71 $54.05 13%
Source: FactSet

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-1.38 -0.86%
Volume: 1.46M
Dec. 9, 2022 2:40p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
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Rev. per Employee
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/zigman2/quotes/209509471/composite
US : U.S.: Nasdaq
$ 48.74
-0.25 -0.51%
Volume: 7.46M
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3.12%
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$ 131.84
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$ 115.35
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N/A
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$ 117.70
-1.83 -1.53%
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P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$17.24 billion
Rev. per Employee
$244,417
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/zigman2/quotes/207599953/composite
US : U.S.: Nasdaq
$ 159.40
-1.38 -0.86%
Volume: 1.46M
Dec. 9, 2022 2:40p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$48.61 billion
Rev. per Employee
$463,140
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$ 52.23
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$41.34 billion
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/zigman2/quotes/200866016/composite
US : U.S.: Nasdaq
$ 131.84
+0.57 +0.43%
Volume: 251,675
Dec. 9, 2022 2:40p
P/E Ratio
21.51
Dividend Yield
N/A
Market Cap
$16.46 billion
Rev. per Employee
$394,574
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/zigman2/quotes/209509471/composite
US : U.S.: Nasdaq
$ 48.74
-0.25 -0.51%
Volume: 7.46M
Dec. 9, 2022 2:40p
P/E Ratio
17.64
Dividend Yield
3.12%
Market Cap
$201.26 billion
Rev. per Employee
$627,719
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/zigman2/quotes/212513426/composite
US : U.S.: Nasdaq
$ 115.35
+1.11 +0.97%
Volume: 1.87M
Dec. 9, 2022 2:40p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$26.78 billion
Rev. per Employee
$409,845
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/zigman2/quotes/203585803/composite
US : U.S.: Nasdaq
$ 117.70
-1.83 -1.53%
Volume: 1.07M
Dec. 9, 2022 2:40p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$17.24 billion
Rev. per Employee
$244,417
loading...
/zigman2/quotes/207599953/composite
US : U.S.: Nasdaq
$ 159.40
-1.38 -0.86%
Volume: 1.46M
Dec. 9, 2022 2:40p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$48.61 billion
Rev. per Employee
$463,140
loading...
/zigman2/quotes/205733290/composite
US : U.S.: Nasdaq
$ 52.23
-0.68 -1.29%
Volume: 1.89M
Dec. 9, 2022 2:40p
P/E Ratio
57.26
Dividend Yield
N/A
Market Cap
$41.34 billion
Rev. per Employee
$401,962
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/zigman2/quotes/206966450/composite
US : U.S.: NYSE
$ 128.85
+0.72 +0.56%
Volume: 1.17M
Dec. 9, 2022 2:40p
P/E Ratio
35.13
Dividend Yield
N/A
Market Cap
$39.15 billion
Rev. per Employee
$1.31M
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/zigman2/quotes/203308192/composite
US : U.S.: NYSE
$ 267.84
-1.95 -0.72%
Volume: 206,392
Dec. 9, 2022 2:40p
P/E Ratio
39.37
Dividend Yield
1.31%
Market Cap
$45.11 billion
Rev. per Employee
$466,578
loading...
/zigman2/quotes/207361368/composite
US : U.S.: NYSE
$ 32.46
+0.0100 +0.03%
Volume: 1.29M
Dec. 9, 2022 2:40p
P/E Ratio
25.28
Dividend Yield
2.59%
Market Cap
$10.53 billion
Rev. per Employee
$505,574
loading...
/zigman2/quotes/200866016/composite
US : U.S.: Nasdaq
$ 131.84
+0.57 +0.43%
Volume: 251,675
Dec. 9, 2022 2:40p
P/E Ratio
21.51
Dividend Yield
N/A
Market Cap
$16.46 billion
Rev. per Employee
$394,574
loading...
/zigman2/quotes/209509471/composite
US : U.S.: Nasdaq
$ 48.74
-0.25 -0.51%
Volume: 7.46M
Dec. 9, 2022 2:40p
P/E Ratio
17.64
Dividend Yield
3.12%
Market Cap
$201.26 billion
Rev. per Employee
$627,719
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