Palo Alto Networks: Buy PANW Stock At $185?

by · Forbes

Palo Alto Networks (NASDAQ:PANW) posted its Q4 fiscal 2025 results (year ended July), with earnings exceeding estimates and revenue tracking expectations. Upbeat guidance for fiscal 2026 pushed the stock up more than 6% in after-hours trading. This pattern isn’t new for the company. As noted in our previous analysis, PANW stock has often delivered positive one-day returns following earnings announcements.

So, is PANW a buy after its latest print and a move to around $185? We believe it is. Although the shares trade at a premium, strong operating execution and solid financials support the valuation. Across key pillars—Growth, Profitability, Financial Stability, and Downturn Resilience—our review points to a robust overall profile.

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How Does Palo Alto Networks' Valuation Look vs. The S&P 500?

Based on what investors pay per dollar of sales or profit, PANW stock looks very expensive versus the broader market.

  • Palo Alto Networks has a price-to-sales (P/S) ratio of 14.3 vs. a figure of 3.2 for the S&P 500
  • Additionally, the company's price-to-free cash flow (P/FCF) ratio is 41.0 compared to 21.4 for S&P 500
  • And, it has a price-to-earnings (P/E) ratio of 116 vs. the benchmark's 23.6

How Have Palo Alto Networks' Revenues Grown Over Recent Years?

Palo Alto Networks' Revenues have risen meaningfully in recent years.

  • Palo Alto Networks has seen its top line grow at an average rate of 18.9% over the last 3 years (vs. an increase of 5.4% for the S&P 500)
  • Its revenues have grown 14.9% from $8.0 Bil to $9.2 Bil in the last 12 months (vs. growth of 5.1% for the S&P 500)
  • Also, its quarterly revenues grew 16% to $2.5 Bil in the most recent quarter from $2.2 Bil a year ago (vs. 6.0% improvement for S&P 500)

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How Profitable Is Palo Alto Networks?

Palo Alto Networks’ profit margins are higher than most companies in the Trefis coverage universe.

  • Palo Alto Networks' Operating Income over the last four quarters was $1.2 Bil, which represents a moderate Operating Margin of 13.5% (vs. 18.8% for the S&P 500)
  • For the last four-quarter period, Palo Alto Networks' Net Income was $1.1 Bil — indicating a moderate Net Income Margin of 12.3% (vs. 12.8% for S&P 500)
  • On an adjusted basis, Palo Alto Networks' net income was $2.3 billion for the last twelve months, resulting in a strong margin of 25.4%.

Does Palo Alto Networks Look Financially Stable?

Palo Alto Networks’ balance sheet appears very strong.

  • Palo Alto Networks' Debt figure was $338 Mil at the end of the most recent quarter, while its market capitalization is $132 Bil. This implies a very strong Debt-to-Equity Ratio of 0.3% (vs. 21.2% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
  • Cash (including cash equivalents) makes up $2.9 Bil of the $24 Bil in Total Assets for Palo Alto Networks. This yields a strong Cash-to-Assets Ratio of 12.3% (vs. 7.0% for S&P 500)

How Resilient Is PANW Stock During A Downturn?

PANW stock has been more resilient than the S&P 500 during several recent downturns. Worried about the impact of a market crash on PANW? Our dashboard How Low Can Stocks Go During A Market Crash shows how key stocks performed during and after the last six market crashes.

Inflation Shock (2022)

  • PANW stock fell 36.0% from a high of $104.83 on 13 April 2022 to $67.09 on 10 January 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 26 May 2023
  • Since then, the stock has increased to a high of $208.28 on 18 February 2025 and currently trades at around $175

COVID-19 Pandemic (2020)

  • PANW stock fell 46.8% from a high of $41.54 on 18 February 2020 to $22.10 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 20 July 2020
  • Our dashboard – Buy or Fear PANW Stock – has more details.

Putting All The Pieces Together: What It Means For PANW Stock

In summary, Palo Alto Networks’ scores across the parameters above are:

  • Growth: Strong
  • Profitability: Strong
  • Financial Stability: Very Strong
  • Downturn Resilience: Strong
  • Overall: Strong

The Verdict

Overall, Palo Alto Networks has delivered excellent results on our framework. The stock trades at a premium valuation of 14 times trailing revenue, broadly in line with its four-year average price-to-sales of 13x. Peers such as Fortinet and CrowdStrike also command elevated multiples, generally between 10 and 25 times revenue.

Based on the average analyst price target of $214, the shares imply roughly 15% upside from current levels. Risks remain, including intensifying competition that could compress valuation. Even so, for investors with high risk tolerance and a 3- to 5-year horizon, we see scope for attractive long-term returns at current price.

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