Palo Alto Networks Again Exceeds Analysts’ Expectations in 1Q16
Cisco leads the network security space, but PANW reported the highest year-over-year growth in 2Q15
So far in this series, we’ve discussed Palo Alto Networks’ (PANW) recent fiscal 1Q16 results. We also discussed the company’s model, its operating segments performance, as well as its products that keep it distinctly placed in the security space.
Let’s take a look at the network security market. According to Synergy Research Group, Cisco leads the worldwide network security market. It’s followed by Check Point Technologies (CHKP), Symantec, Huawei, Juniper Networks (JNPR), and Palo Alto Networks (PANW). According to Jeff Wilson, research director for cybersecurity at IHS, the top four players in the network security space—Cisco, Check Point, Fortinet, and Palo Alto Networks—posted double-digit growth in 2Q15 on a year-over-year basis, as the above below chart shows. Among these players, PANW registered the most year-over-year growth. It’s rapidly becoming a threat to established players like Cisco (CSCO).
Cybersecurity players are increasingly stocking up their portfolios
Cisco and IBM are aggressively adding to their security assets. In 2013, Cisco made a big move into the cyber security space with its $2.7 billion acquisition of SourceFire. In 2015, it acquired OpenDNS, a company that provides advanced threat protection on devices regardless of place or time. Lancope is the recent addition to its portfolio, for which the company forked out $452 million.
FireEye (FEYE), also keen on beefing up its portfolio, acquired Mandiant Corp, a forensic security group, for $1 billion in 2014. Mandiant recommends which security options a company should deploy after an attack.
Increase in M&A and consolidation expected in cyber security space
According to 451 Research, there were 82 cybersecurity security deals worth $6.62 billion that happened by July 2015. The firm also believes that, with nearly 1,200 security firms still independent, there’s a strong chance of acquisition, driving consolidation in the cyber security space.
You could consider investing in the iShares S&P North American Technology-Multimedia Networking Index Fund (IGN) to gain exposure to Palo Alto. IGN invests 10.36% of its holdings in Palo Alto Networks.
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