For the most part, tech stocks have been particularly hard-hit during this year’s stock market downturn. However, that’s not been the case with Palo Alto Networks (NASDAQ:PANW). PANW stock is down for the year (around 7.56%).
Yet compared to the overall market? It’s been relatively stable. Stocks overall, as measured by major indices like the S&P 500, are down by double-digits. Tech stocks, as measured by Nasdaq Composite, are down by an even greater amount.
But this resiliency during a time of market volatility isn’t its sole appeal. What makes this cybersecurity play most appealing is its long-term growth potential. In fact, that’s why the stock has held up well in recent months.
It’s also why shares will likely make a continued move higher in the years ahead. With this in mind, you may want to consider buying the stock, while it remains reasonably-priced.
| PANW | Palo Alto Networks | $507.15 |
Why PANW Stock has Held Steady?
You may be wondering why Palo Alto Networks shares have held steady so far this year. After all, plenty of growth plays have hit hard over the past few months. However, there’s one key reason why this stock has avoided the big declines seen with other high-quality names in the tech space.
Many names in this category, while promising in the long-term, are facing near-term headwinds. Their rate of growth is taking a breather. Either due to the economic slowdown currently playing out, or due to the pandemic pulling forward future growth.
Put simply, this company isn’t really facing that problem. As seen in its most recent earnings report (released back in May), Palo Alto continues to report strong revenue. For its fiscal quarter ending April 30, it reported revenue growth of 29% compared to the prior year’s quarter.
Billings, an important metric for software-as-a-service (SaaS) companies, were up 40% versus the prior year’s quarter. Earnings per share (EPS) swung from negative to positive. Even better, the trends working in its favor now are likely to continue working in its favor in the quarters (and the years) ahead. This of course bodes well for PANW stock.
Things Aren’t Slowing Down for Palo Alto
Right now, the aforementioned results are helping to outweigh the downward pressure on tech stocks across-the-board, due to rising interest rates. This resiliency despite the uncertainty stands to carry on, if there’s more market volatility ahead.
Again though, that’s not the reason why you should buy PANW stock. It’s the high potential for it to hit loftier price levels over a long timeframe that makes it a stock worth making a buy-and-hold position. How will it reach loftier levels? By delivering results in line with the results reported in recent quarters, with little in the way of growth deceleration.
This is very possible, given that robust demand for cybersecurity services isn’t going away anytime soon. Recent cybersecurity incidents underscore how vital the services of providers like Palo Alto are to enterprises large and small. Without them, they are left extremely vulnerable. This points to these end users not skimping out on protection, even if an economic downturn compels enterprises to tighten their belts.
In turn, a high-likelihood that Palo Alto continues to report annual revenue growth in the 20%-30% range. This continued scaling up will also result in a big increase in its earnings.
The Verdict on PANW Stock
Palo Alto Networks stock currently earns an “A” rating in my Portfolio Grader. A name that’s held up since the start of the tech sell-off late last year, even if the overall market makes new lows in the coming months, this may have little effect on its own performance.
Many trends may be calming down post-pandemic, but not the increasing need for adequate cybersecurity protection. This will enable it to continue growing its revenue at a steady pace. Not only that, it will also translate into strong earnings growth. This will help a move back to its all-time high, and on towards higher prices.
In short, it’s clear what the best move is right now with PANW stock. Weighing downside risk against its upside potential, it’s one of the best opportunities out there among tech stocks. As it sits tight at around $500 per share, consider it a buy.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.