An Opportunity in Security

Shares of cybersecurity specialist Palo Alto Networks (NYSE: PANW) have been in a slump for much of the summer, recently down over 16% from their all-time high in May. The story isn’t as bad as it looks, though, and this appears to be a good buying opportunity for risktolerant investors.

Palo Alto’s revenue actually jumped 22% year over year in its fourth quarter, thanks to continued market-share gains and broader adoption of its industry-leading cybersecurity product portfolio. Revenue for the full fiscal year surged 28% to $2.9 billion.

Several headwinds have been pressuring the stock. For starters, many of Palo Alto’s customers are transitioning over to shorter annual contracts instead of multiyear ones, which is affecting revenue recognition. The trade war between the U.S. and China is also having a negative, albeit small, impact on the bottom line, and Palo Alto is shelling out cash to fund its string of acquisitions over the last couple of years. The company recently announced plans to acquire Internet of Things (IoT) security specialist Zingbox for $75 million.

Nevertheless, this is a best-in-class security stock with an appealing valuation. Given the growing importance of cybersecurity in today’s digital age, Palo Alto appears to be a great long-term growth story worth holding onto for the foreseeable future. (The Motley Fool owns shares of and has recommended Palo Alto Networks.)