There is no denying the constant threat of cybersecurity attacks. The average global cost of a data breach in 2024 so far is $4.88 million, according to a report by IBMThis amount grows with each passing year. The risks have never been greater, and with the significant potential for business disruption, cybersecurity has become a critical consideration for any business – and Palo Alto Networks (NASDAQ: PANW) He is the undisputed leader in this field.
The company’s consistent implementation and business performance has led to its astonishing rise. Palo Alto stock has risen 111% over the past three years, driven by strong revenue and earnings growth resulting from high demand for… Cyber security solutions. But there is more. Since Palo Alto’s IPO in mid-2012, the stock has risen from a split-adjusted price of $14 to more than $383, representing a staggering 2,638% gain.
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On Thursday, coinciding with the release of the company’s quarterly results, Palo Alto announced plans to split its stock for the first time since September 2022. The stock has more than doubled in the meantime, which is likely a catalyst for this corporate action. This revelation prompts investors to take a fresh look at the stock. Let’s review the details of the stock split and what it means for investors.
The Palo Alto company announced that its board of directors has approved a 2-for-1 forward stock split. This will result from an amendment to the company’s restated certificate of incorporation, which management says will create a “proportionate increase in the number of authorized shares of common stock.”
As a result of the split, shareholders of record as of December 12, 2024 will receive one additional share of stock for every share they own after the market close on Friday, December 13. The stock is expected to begin trading on a daily basis. Based on the revised split on December 16.
Palo Alto Networks shareholders do not need to take any further action in order to acquire the additional shares of stock. Investment banks and brokerage firms handle all the details behind the scenes. The new shares will appear in your investment accounts without you having to take any further action. The exact timing can vary from one brokerage to another, so investors don’t have to worry if the newly issued shares aren’t there right away on December 16. It may take hours or even days for additional shares to appear.
For every share of Palo Alto stock a shareholder owns — currently trading for roughly $386 per share (as of this writing) — after the split, investors will keep two shares worth $193 each.
As is clear from the example above, the total value of the property does not change based on the stock split alone, it is just a different way of viewing the whole. In other words, if you have one dollar, it doesn’t matter if you have a dollar bill or a four-quarter bill, you still have the same amount of money. By the same token, Palo Alto shareholders will simply have more shares at lower prices.
However, over the past few years, investor psychology has gained greater importance, and the excitement of a stock split itself has generated greater interest. Companies also believe that a falling stock price can boost demand for lower-priced stocks. While this is often the case – at least in the short term – historically the euphoria fades, and investors begin to focus on what matters most: the operating and financial performance of the company, which will ultimately be what drives the stock price up or down. In the long term.
While the stock split alone isn’t reason enough to buy Palo Alto, there are other reasons why a cybersecurity professional might want to buy. The company’s financial report provides plenty of evidence to support this argument.
In the first quarter of fiscal 2025 (ending October 31), Palo Alto reported its revenue rose 14% year-over-year to $2.14 billion. This sent earnings per share (EPS) up 77% to $0.99. Both numbers were enough to exceed Wall Street expectations.
Perhaps most importantly, the results led to a 40% increase in the company’s next-generation security annual recurring revenue (ARR), which jumped to $4.5 billion. It’s almost always a good sign when ARR is growing at a faster rate than revenue, because it indicates that strong growth will continue in the future.
The need for cybersecurity solutions shows no signs of slowing down. The global cybersecurity market was valued at $238 billion in 2023, and is expected to rise to $878 billion by 2034, a compound annual growth rate of about 13%, according to Precedence Research.
If you have any doubts about Palo Alto’s lineage, consider this. The company is classified as a leading company in Gartner2024 Magic Quadrant for Software Defined Networking Solutions. Palo Alto was also recognized as a leader in Q4 2024 Forrester Wave report for enterprise firewall solutions.
Investors should not purchase Palo Alto Networks stock based solely on the impending stock split. Instead, the company’s long track record of consistent execution, impressive stock price gains, and strong performance make Palo Alto stock a winning investment.
There’s the issue of Palo Alto’s valuation, which could put off some investors. The recent rise in stock prices has led to a proportional increase in its valuation. The Palo Alto company currently sells for 60 times forward earnings and 12 times forward sales – not cheap by any means. However, Palo Alto stock is up 368% over the past five years, 4 times the company’s returns. Standard & Poor’s 500So you get what you pay for.
The company’s strong commercial and financial growth makes it a great candidate for it Average cost in dollarswhich allows you to buy fewer shares when the cost is higher while you can buy more shares when the stock price falls.
If you feel like Palo Alto is too expensive right now, it definitely deserves a place on your watch list.
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Danny Vina He has no position in any of the stocks mentioned. The Motley Fool recommends Gartner, International Business Machines, and Palo Alto Networks. The Motley Fool has Disclosure policy.
Palo Alto Networks announces a 2-for-1 stock split. Here’s what investors need to know. Originally published by The Motley Fool