For investors looking for a cybersecurity comeback story, Palo Alto Networks may be quietly writing one. 2025 performance: 1.2% Forward price-to-earnings ratio: 43.7x, with a five-year average of 53x, according to FactSet data. Our Rating: Buy Equivalent 1 Our Price Target: $225 per share PANW YTD Mountain PANW Stock Price Performance YTD. Palo Alto stock appears to have had a weak year, as it is expected to rise about 1% in 2025, but it was unstable behind the scenes. Particularly in the second half of this year, stock prices were subdued by investor concerns over CEO Nikesh Arora’s takeover spree. Despite creating a stock price overhang, Palo Alto’s acquisitions of CyberArk and Chronosphere could position the cybersecurity giant in an even stronger position in 2026 as more customers seek to integrate security tools from disparate vendors. This aligns with Arora’s long-term strategy called platformization, or his plan to build an integrated security platform that includes network, cloud, identity, observability, and threat intelligence. Rather than selling siled products, Palo Alto unifies security operations so customers can easily detect and respond to threats from one place. It’s not the only game in Palo Alto, as rival cybersecurity provider CrowdStrike, which shares the club’s name, also emphasizes a platform approach. That makes Palo Alto’s two biggest acquisitions this year especially important. CyberArk’s $25 billion acquisition, announced in late July, will provide Palo Alto with an increasingly important layer of identity security, one of the most targeted entry points for hackers. The deal is expected to close in early 2026 and generate annual recurring revenue of more than $1.5 billion and free cash flow of about $400 million, according to Citigroup, which has a buy rating on Palo Alto’s stock and a $235 price target. Palo Alto expects to finish the fiscal year with annual recurring revenue of $7 billion to $7.1 billion, and the consensus estimate for free cash flow is about $4 billion, according to FactSet. The second major deal is Palo Alto’s $3.35 billion acquisition of Chronosphere, which further deepens Palo Alto’s commitment to observable security, a tool that helps customers monitor and understand what’s happening across their systems in real time. Citi analysts said the acquisition will also help Palo Alto build long-term relationships with the next generation of fast-growing AI startups, many of which are eager for Chronosphere’s low-cost observability solutions. The Palo Alto and Chronosphere transaction, announced in November, is expected to close in the second half of 2026. While these two multibillion-dollar deals involve some degree of execution risk and dilute value for existing shareholders, the moves highlight Paro’s entry into the AI era of cybersecurity where threats are more automated. Citi argues that if Palo Alto continues to execute on its platforming strategy by offering customers more cost-effective solutions, its stock price could rise next year. That is a view we also share. Morgan Stanley is also positive about next year’s Palo Alto. “We continue to like the stock’s pricing as we move into 2026 and believe there is still significant upside in performance this year as backend loads increase, acquisition completions/integrations increase, and AI tailwinds strengthen,” they wrote in a Dec. 18 client note. (Jim Cramer’s Charitable Trust is long PANW. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
