Palo Alto Networks is playing its cards right with M&A and artificial intelligence

Given this context, it is easy to see why the market is focusing on Palo Alto Networks. This interest, however, must be distinguished from mere speculation and is based on more solid grounds. First and foremost, its stock market performance. The group’s share price has risen by 23 per cent over the past year. Over the longer term – five years – the increase stands at 392 per cent. These are positive trends which, however, tell us little on their own. To understand the true state of affairs at the Californian company, it is necessary first to compare these performance figures with those of other firms in the sector. But that is not all. It is also useful to look at the company’s valuation multiples and fundamentals. It should always be borne in mind that, on the one hand, this is not a solicitation to invest; and that, on the other, the DIY investor must approach such matters with the utmost caution.

Well then: Palo Alto Networks – according to the Bloomberg terminal – is not among the shares that have risen the most over the last 12 months. For example, one might recall that Palantir has literally gone through the roof, recording growth of 417.4 per cent. Cloud Fare itself has seen a rise of 135.3 per cent. Then there are Fortinet and CrowdStrike, which have risen by 80.9 per cent and 75.2 per cent respectively. That’s true! There are other companies in the sector that have fared even worse: these include Sentinel One (-21.2 per cent) and Rapid (-43 per cent). That said, however, Palo Alto Networks – although it has recently entered a corrective phase – can boast a respectable performance. This is also because the sector index (Nasdaq CTA Cybersecurity Index) has risen by 31.4 per cent over the past year, whilst the Nasdaq Composite has had to settle for growth of 16.08 per cent.

Given a rise that is not ‘crazy’ but still substantial, what, then, are the stock market multiples? Seeking Alpha, as usual, provides an overview of the indicators. The price-to-non-GAAP-earnings ratio for 2025 stands at 60.13. In other words: a figure that is high in itself. However, this figure is lower – and rightly so – than Palantir’s utterly nonsensical P/E ratio, which stands at 256.13. To put it another way: if, hypothetically, the projected earnings for 2025 were to be maintained, it would take more than 253 years to recoup the price of a Palantir share. Absolute madness! Even CrowdStrike’s multiple is higher, standing at 134.13 (again based on 2025 and again using non-GAAP EPS). Fornitet’s price-to-earnings ratio, on the other hand, is more modest. Here, the figure – provided by Seeking Alpha itself – stands at 42.12 times.

In light of this – albeit brief – comparison with some of its competitors, our impression of Palo Alto Networks shifts slightly. The share price is still considered expensive, but not as much as it might have seemed at first. That said, whilst looking at the company’s multiples, the view that the Californian group is not undervalued is reinforced by other indicators. The non-GAAP PEG ratio, for example, is higher than that of the relevant sector. A similar pattern emerges with the ‘Enterprise value to EBIT’ ratio. The picture improves – and not just slightly – when looking at a multiple closely monitored by analysts in the high-tech sector. Which one? The share price relative to operating cash flows. According to Seeking Alpha, the forward-looking indicator for 2025 stands at 31.36, compared with 20.2 for the benchmark sector. In short: Palo Alto Networks – like many other companies in the sector – is to be considered expensive, but not at absurd levels.

So far, we have looked at some insights into the share’s market multiples. However, there is also another approach being considered by experts: technical analysis. “The share, having risen significantly,” explain the chart analysts consulted by *Il Sole 24 Ore*, “is now in a corrective phase in which, moreover, the weekly RSI index has shown weakness.” This trend began in mid-December last year (17/12/2024), when the share price reached an intraday high of $207. Subsequently, Palo Alto Networks’ share price fell, before “rebounding to reach – on 18 February 2025 – a high in the $208 range, which has become a key resistance level”. From there, through three Elliott waves, “the cybersecurity group retraced to a low in the $152 range” (7 April 2025). Once again, the Californian company’s shares “resumed their upward trend and, forming the classic five-wave Elliott pattern, reached – as the experts explain – the resistance level, still situated around $208”. At this point, the share price has – once again – lost ground, and it cannot be ruled out that ‘it may fall by the standard 50 per cent from its highs, reaching the $175 range’. Should it rally again, breaking through the $208 resistance level, “then,” the chart analysts conclude, “we would see the start of a new bullish phase”.

Yes, a bull market. But what about the figures in the profit and loss account? In the last quarter – the third of the 2024–2025 financial year – the Californian group

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