Extended Remote Work Provides More Upside for This Network-Security Leader
Teleworking is back on...
As we approached the winter, many companies had decided to start bringing people back into the office in early 2022. Businesses figured vaccination rates would be high enough to safely get most (if not all) of their employees back in the building for the first time in nearly two years.
But now, those plans are on hold...
You see, the COVID-19 Omicron variant has companies rethinking their return to the office. Cases are rising again, and businesses are getting cautious.
In recent weeks, companies have pushed back their planned dates for a return to in-person work. Industry giants like Apple (AAPL) and Alphabet (GOOGL) have postponed it indefinitely.
This means that many of us will continue using our company laptops – which often contain sensitive information – from our homes.
So, companies will need to continue relying on businesses like today's cybersecurity innovator to protect their information as millions of employees telework across the country (and globe).
Palo Alto Networks (Nasdaq: PANW) is a $52 billion network-security company. Global-research and advisory firm Gartner has ranked its security systems as the best in firewall protection for 10 straight years.
A firewall monitors Internet traffic in and out of a private network. Any time you type a web address into your browser, your computer generates a request. That request is received and fulfilled by a server – a broad computer system connected to an external network. That's where you might expose yourself to cyberattacks... including malware and phishing.
Palo Alto's traditional firewall technology has been the best in the industry. It will also lead the pack in next-generation firewall protection...
Traditional firewalls only protect the "perimeter" of a private computer network. Since network components, including applications, servers, and data, are now migrating to the "cloud," next-generation firewalls will need to adapt to that environment as well.
Palo Alto's network firewalls operate on "zero trust." That means they don't trust any computers they're connected to... including those within their own network.
These firewalls are designed to protect critical assets and isolate data breaches, using various controls and security analytics. So, if one connection in an internal network of five computers is compromised, the other four are not.
Folks are clamoring for these next-generation security services...
With the Omicron and Delta variants forcing many people to continue working remotely, businesses need to make sure their networks are secure... to prevent hacking and other data-security problems. High-profile data breaches at T-Mobile (TMUS) and Electronic Arts (EA) this past year have further highlighted the need for stronger cyber defenses.
And Palo Alto's network-security technology is leading the way...
The company's strong first-quarter results are driving even more optimism among management. For example, its total revenue grew 32% year over year to $1.2 billion.
CEO Nikesh Arora said Palo Alto's solid performance encouraged the company to raise its full-year revenue guidance of $5.28 billion to $5.33 billion to a new range of $5.35 billion to $5.4 billion. That's above Wall Street's $5.31 billion estimate.
Also, the Nasdaq 100 Index – comprising 100 of the largest non-financial companies listed on the Nasdaq exchange – recently announced annual changes for those companies.
Palo Alto is one of the new companies that will be included in the index, beginning today – December 20.
That's a big tailwind... You see, inclusion into the Nasdaq 100 could flood Palo Alto shares with institutional money. That's because any index fund that tracks the S&P 500 Index will need to buy Palo Alto shares.
According to ETF.com, there are eight index funds that track the Nasdaq 100. These funds have more than $240 billion in assets under management. A percentage of each fund will have to buy up Palo Alto shares, so their holdings will continue to match those of the Nasdaq 100.
Palo Alto shares climbed slightly following the Nasdaq 100 announcement. But we didn't see the massive surge that would suggest that all those funds have already bought the necessary shares. That could signal a wave of money coming into Palo Alto shares once it officially enters the Nasdaq 100.
Beyond Palo Alto's Nasdaq 100 inclusion, the company has rosy long-term prospects. Businesses will always need to protect their computer networks. Now, unprecedented levels of teleworking have left some companies more open to cyberattacks. That means they'll need to turn to innovators like Palo Alto.
The continuing demand for network-security services, along with the company's move into the Nasdaq 100, should be a tailwind for company shares.
Sometimes investing is simple.