Palo Alto Networks (PANW) stock remained flat in 2025, with slowed sales growth. Despite this, the stock is undervalued and a buy opportunity, trading 17% below a $225 fair value estimate. The company targets a 40% adjusted free cash flow margin by fiscal 2028. Morningstar Chief US Market Strategist Dave Sekera recommends it as a stock pick.

Palo Alto Networks is a leader in cybersecurity, offering holistic security coverage across network security, cloud security, and security operations. The company benefits from increased vendor consolidation as customers seek to rationalize costs. Its wide moat rating is based on strong customer switching costs and a network effect, securing its dominance in the market.

Morningstar’s fair value estimate for Palo Alto stock is $225, implying a 2026 enterprise value/sales multiple of 15 times. Revenue is forecasted to grow at a 13% CAGR over the next five years, with opportunities for business expansion. The company’s land-and-expand model is expected to drive operating leverage and produce excess returns. Palo Alto projects continued upselling and cross-selling activities.

Risks for Palo Alto include potential disruption by smaller upstarts, the need to constantly invest in technologies, and execution risks related to acquisitions like CyberArk. The company’s solutions are essential for protecting customers from cyberattacks, making data privacy and security crucial concerns. Competitors offering their own cybersecurity solutions pose a threat to Palo Alto’s growth opportunities.

Bulls on Palo Alto point to strong secular tailwinds in cybersecurity, high-margin firewalls generating substantial free cash flow, and the benefits of clients consolidating vendors. Bears note competition from public cloud vendors and platform-based cybersecurity approaches from competitors, along with potential risks from the CyberArk acquisition.

Read more at Morningstar: Palo Alto Networks: Undervalued by 17%, This Industry Leader’s Stock Is a Buy for 2026