Friday, March 3, 2017

PANW plunged 20%, should Check Point gloat?

Two days ago Palo Alto Networks share price has experienced a sharp fall, losing about 20% of its value in a single day, following second quarter results announcements and a warning towards the third quarter performance.

Some of my Check Point oriented friends would say reality is finally catching up with PAN, but I would not be that quick in judgement.

Being exposed to both vendors, I can say each one has its solid pros and cons, and technology competition is not only driving sales up (or down in some cases, lol) but also works for the best of information security in whole.

We all know that Wall Street indexes do not reflect directly the quality of the technology or even its market performance. It is all about making quick money, earning per share in this particular case. As FT explains, investors decided to get out of PANW because of the earning warning.

In reality we should be more interested in market share and its growth. During the last several years Check Point revenue grows organically with the market, plus or minus one percent, while its main competitors such as Fortinet and Palo Alto have double digit year to year growth numbers.

Yes, PAN growth is slowing down. It is not around 50%, as in 2015, but it is still estimated to reach more than 20% for 2017. Which is 2 or 3 times bigger than 7% to 9% growth achieved by Check Point through the last three years.

In other words, even while slowing down, Palo Alto Networks is catching up with Check Point market share.

Check Point still has a lot to do to change this tendency and start winning the market back.


  1. Yeah I would not compare shares with technical capabilities... or even market share :)

  2. CP growing by a 6% and PAN growing by 20% could mean that CP is gaining on PAN, or it could mean the exact opposite. You need more information to make the sort of statements that you are making.

    1. Not really. If the whole market grows 6%, and company A grows also 6%, it only means company A does not gain any additional relative market share at all. However, any other company that has a bigger y2y growth will gain additional market share. If I remember correctly, this is a 6th grade math equation.

      That said, you can check the numbers by yourself, the information is out there.

  3. Market share and technology mean nothing if the company behind it goes out of business. Given the multi-year investment the products in our space are, a company's long-term financial outlook is as relevant to the conversation as the technology.

    1. Well, it is too early to say if PAN goes out of business, Dameon. Also, you know best of all what happens. Remember, Nokia Security Solutions poing out of business once? :-)

    2. At least in the case of the Nokia Security Appliance business, it went to a company on strong financial footing :)

      I doubt PAN is going out of business tomorrow, but I do see big changes ahead if they can't get their finances in order. That is going to have an impact on their customers.

    3. I do believe PAN is quite solid on the market. Their business performance is also good, although rapid growth imposed some inflated expectations upon then on Wall Street. What happens there is stock value correction.

      One cannot sustain 35 to 50% year to year growth. that's it. Investors sometimes forget that. Hence, price correction.