Wall Street Eyes Cybersecurity Titans: Palo Alto Networks and CyberArk Shine

Wall Street Eyes Cybersecurity Titans: Palo Alto Networks and CyberArk Shine

The short version:

• Investment bank Stephens started covering Palo Alto Networks and CyberArk with a positive view.
• The firm pointed to steady growth in security spending.
• More frequent attacks keep demand for both companies’ products high.
• Each has a strong position in its part of the market.

Stephens starts coverage

Stephens has initiated coverage of two large security companies, Palo Alto Networks and CyberArk, with an optimistic stance. The case is simple. Companies keep spending on security even when other IT budgets are tight, and these two hold large shares of the segments they serve, which gives them pricing power and a steady base of renewals to build on.

Palo Alto Networks: the platform play

Palo Alto Networks started with firewalls and now sells a broad platform that also covers cloud security and security operations. Its strategy is to get customers to consolidate many separate tools onto its products.

Wall Street has mostly rewarded that approach. The company is profitable. It has also been adding AI features across its products, which analysts see as a way to keep customers on the platform.

AI in the product line

Palo Alto has built machine learning into threat detection for years. The newer push is AI that helps analysts investigate and respond faster, and that predicts likely attacks rather than just reacting to them.

CyberArk: identity security

CyberArk specializes in identity security and is best known for privileged access management, which controls the powerful admin accounts that attackers most want to steal. Identity attacks have grown. So has demand.

Investors like CyberArk’s focus. It has also expanded through acquisitions, including Venafi for machine identities and Zilla Security for identity governance.

Narrow focus, wider reach

Privileged access is still CyberArk’s core, but the company now sells protection for all kinds of human and machine identities. That gives it a larger market to grow into.

Demand keeps rising

Attacks are becoming more frequent and more damaging, and spending on defenses keeps climbing year after year regardless of the wider economy. Both companies are positioned to win a large share of that money, Palo Alto as a broad platform and CyberArk as an identity specialist.

Stephens expects the structural growth in security spending to continue, with these two among the leaders.

What investors are watching

Analyst initiations do not change a company’s business. They can shift sentiment, though. For these two, investors will be watching quarterly results for signs that the platform and identity strategies keep working.

Palo Alto’s test is whether customers keep consolidating on its platform. CyberArk’s is whether it can turn its acquisitions into new revenue.

Investors weighing either stock should look past the rating and at the numbers: revenue growth, recurring revenue and margins.

John King, CISSP, PMP, CISM

John King currently works in the greater Los Angeles area as a ISSO (Information Systems Security Officer). John has a passion for learning and developing his cyber security skills through education, hands on work, and studying for IT certifications.