Colin Cieszynski Palo Alto Networks PANW-N WATCH Aug 07, 2024

She sold Z-Scaler to add more PANW whose products are better. PANW is transitioning to offer more platform services. Shares have been lagging the past quarter, trading at -14% to peers, yet growing revenues 15% in coming years. Free cash flow is 37%. This and Crowdstrike are the tops in cyber.

The last quarter was mostly in line. The new platform will take time to transition. It's trading off, because that last quarter was not a blow-out. But cybersecurity stocks will continue to work.

Has a great platform strategy and products; growing cash flow to $4.5 billion by year's end. Will rebound as they execute.

He sold and put profits into CRWD (and then took profits on that, too). Like FTNT, still great names to own long term, as cybersecurity threats are only going to get bigger. Secular demand for software and services will continue. PANW is 53x forward PE, for 15% earnings growth, so he needs a lower PE to be interested. Capex slowdown from businesses in this area.

They've maintained momentum recently even as other tech stocks have come down. Whereas Fortinet and Crowdstrike specialize in parts of cybersecurity, PANW does it all and does very well in small/medium-size companies.

Cybersecurity is a mega-trend long term. Bit expensive at 50x forward PE for 13% growth, and that growth rate has come down. That's why he sold. Great channel of higher highs and higher lows.

They report Tuesday. It has a habit of falling after reporting earnings, so wait until after the report.

Reasonably priced. Safer than CRWD, though slower-growing. Overall security software space is very attractive -- one of the most defensive parts of the software industry.

Cybersecurity is the utility of technology, a necessity. Not economically sensitive, so won't get a big boost in a strong economy. But it's very consistent.

He could own this, but doesn't. Instead, he owns CRWD and a cyber ETF. Expectations in the group are high, and the multiples aren't cheap. He doesn't actually have a ton of tech exposure right now, having moved to more economically sensitive names.

CRWD and PANW are volatile, but demand is so strong for cybersecurity that these are long-term winners.