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

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

Palo Alto PANW,
+12.27%
Chief executive 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 contributed to the rise in Palo Alto’s stock included the expansion of its buyback program and a three-for-one stock split scheduled for Sept. 14.

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

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

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

What about its competitors? In its fiscal 2021 annual report, Palo Alto listed five “main competitors” by name: Cisco Systems Inc. CSCO,
-0.23%,
Check Point Software Technologies, Ltd. CHKP,
+0.57%,
Fortinet Inc., FTNT,
+1.17%,
Zscaler Inc. ZS,
+1.93%
and CrowdStrike Holdings Inc. CRWD,
+4.06%.

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

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

Palo Alto isn’t the only one with 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 based on expected compound annual growth rates (CAGR) for sales through 2024:

Company

Heart

Expected sales two-year CAGR to 2024

Estimated Sales – 2022 ($millions)

Estimated Sales – 2023 ($millions)

Estimated Sales – 2024 ($millions)

Purchase capital. ($millions)

CrowdStrike Holdings Inc. Category A

CRWD,
+4.06%

33.9%

$2,142

$2,935

$3,837

$39,670

Zscaler Inc.

ZS,
+1.93%

31.2%

$1,243

$1,660

$2,140

$23,124

Palo Alto Networks Inc.

PANW,
+12.27%

21.8%

$6,070

$7,462

$8,998

$50,620

Fortinet Inc.

FTNT,
+1.17%

20.8%

$4,383

$5,299

$6,392

$39,678

Arista Networks Inc.

A NET,
+0.02%

12.3%

$4,064

$4,634

$5,124

$38,686

Motorola Solutions Inc.

MSI,
-0.77%

6.5%

$8,867

$9,416

$10,059

$41,498

Juniper Networks Inc.

JNPR,
+0.45%

4.5%

$5,213

$5,501

$5,690

$9,346

Check Point Software Technologies Ltd.

CHKP,
+0.57%

4.2%

$2,317

$2,427

$2,515

$15,264

Cisco Systems Inc.

CSCO,
-0.23%

4.1%

$52,620

$54,930

$57,024

$197,565

Source: FactSet

Click on the tickers for more on each company. Then read Tomi Kilgore’s in-depth guide to the wealth of information available for free on MarketWatch’s deals 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 biggest company on the list, Cisco Systems, brings up the rear. Again, Cisco’s End to End Security segment is expected to grow sales to $4.625 billion in 2024 from $3.86 billion in 2022, for an expected CAGR of 9.5%.

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

Company

Heart

Share ‘buy’ ratings.

Share neutral reviews

Share “sell” ratings.

Closing price – August 22

Consensus price target

Implied 12-month upside potential

CrowdStrike Holdings Inc. Category A

CRWD,
+4.06%

100%

0%

0%

$185.88

$236.50

27%

Zscaler Inc.

ZS,
+1.93%

84%

16%

0%

$163.00

$204.83

26%

Palo Alto Networks Inc.

PANW,
+12.27%

92%

8%

0%

$508.05

$655.41

29%

Fortinet Inc.

FTNT,
+1.17%

69%

31%

0%

$50.32

$71.74

43%

Arista Networks Inc.

A NET,
+0.02%

57%

39%

4%

$127.14

$149.91

18%

Motorola Solutions Inc.

MSI,
-0.77%

72%

21%

7%

$248.66

$286.44

15%

Juniper Networks Inc.

JNPR,
+0.45%

40%

40%

20%

$28.97

$33.28

15%

Check Point Software Technologies Ltd.

CHKP,
+0.57%

41%

37%

22%

$121.71

$137.77

13%

Cisco Systems Inc.

CSCO,
-0.23%

45%

52%

3%

$47.71

$54.05

13%

Source: FactSet

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