Palo Alto Networks Stock is Soaring: Is it Too Late to Buy? | PANW Stock Analysis

Parkev Tatevosian, CFA•Oct 2, 2026

Summary

Parkev analyzes the impact of agentic AI on the cybersecurity sector, noting that increased demand and sensational headlines have propelled Palo Alto Networks to significant gains. While the company's revenue growth curve has steepened since early 2026, Parkev highlights concerning underlying trends, such as the collapse of operating margins from 12.5% to 5.4%. This suggests that the company is spending heavily to acquire its recent growth, which is further reflected in a sharp decline in return on invested capital from 45% in 2024 to just 1.77% today.

Regarding the stock's valuation, Parkev points out that the forward P/E ratio has nearly doubled over the last two years, reaching levels around 78 to 85. He believes this revaluation is excessive and provides the following stock-specific analysis:

Palo Alto Networks (PANW): Parkev maintains a "Hold" rating on the stock, noting that his DCF analysis values the company at $164, while it currently trades at approximately $385. He suggests that investors who have seen gains of over 100% should consider trimming their positions or taking profits. Parkev also proposes a strategy of selling covered calls at a $425 strike price to generate income while being prepared to exit the position if the stock continues to rise.

Mentioned Stocks

PANW

Sentiment: HOLDAction: RECOMMENDED

Reasoning: Parkev highlights that while AI demand is high, Palo Alto Networks' operating margins have dropped significantly from 12.5% to 5.4% and return on invested capital has plummeted to 1.77%. He calculates a DCF intrinsic value of $164, which is significantly lower than the current market price of approximately $385. Parkev recommends a 'Hold' rating and suggests investors consider selling covered calls at a $425 strike price or trimming their positions to secure profits after the stock's massive rally.

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