Penn Wealth Publishing

2020.01.05 Penn Wealth Report Vol 8 Issue 01

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14 penn wealth Report volume 8 issue 01 05 Jan 2020 Penn Wealth Report Copyright 2020. All Rights Reserved. investment intelligence Palo Alto Networks Inc Cybersecurity e content of this report reflects the personal views, opinions, and research of Penn Wealth Publishing. While measures are taken to help assure the accuracy of data, no guaran- tees can be made and the firm is not liable for any losses incurred by subscribers. is is not a solicitation to buy. Always consult your investment professional before investing any money. Earlier in this issue, we mentioned that a first-quarter downturn might be in the off- ing, and that there might not even be a clearly-defined catalyst. at being said, if there is a clear reason for the downturn, we will go out on a limb and predict that it will be a cyberwarfare threat emanating from Iran. What missiles lobbed at a couple of bases in Iraq couldn't do, a cyberattack—if suf- ficient—could most certainly accomplish. e goals are twofold by enemy combat- ants: reap actual benefits from the attack, such as the theft of personal data or classi- fied government or corporate information; and cause mass fear, which would lead to a market selloff. It is not a matter of if this eventually happens, it is merely a matter of when it happens. Another possible sce- nario would be a cyberattack on American infrastructure, such as some point on our power grid. Once again, let us go out on a limb and say America is not as prepared as it should be for such an attack. We pray our scenario does not play out, but if it does, we expect one select group of stocks to buck the trend and gain ground: cybersecurity holdings. We already own CIBR, the First Trust NASDAQ Cybersecurity ETF, in the Dynamic Growth Strategy. It has blown through our price target since, and we expect more outperfor- mance in 2020. Currently, the top holding in CIBR hap- pens to be one of our favorite cybersecurity companies: Palo Alto Networks Inc ($190- $240-$261). is $23 billion pure cyber play sells security appliances, subscriptions (huge recurring revenue), and support ser- vices to government entities and companies of all sizes. e company's portfolio of prod- ucts includes: virtual firewalls and firewall appliances, endpoint (think laptops, tablets, and mobile devices) protection, cloud secu- rity, and cybersecurity analytics. e Santa Clara-based firm was established in 2005. Acquisitions and organic growth drivers. In February of 2019, Palo Alto intro- duced the world to Cortex, the industry's only open and integrated, AI-based secu- rity platform. As opposed to detection and response, Cortex was designed to utilize artificial intelligence to analyze data at scale for threat prevention—before it ever gets to the detection and response stage. To support its Cortex program, the company bought Internet of ings (IoT) cybersecurity firm Zingbox in September of 2019. Most people never stop to think about just how much critical data now exists in the "cloud." It used to be that all information was stored on a device (remember asking the salesperson how much memory a machine had?) or on a local server. Now, virtually everything exists at some remote location, perhaps operated by Microsoft's Azure or Amazon Web Services (AWS), ready for low-latency transport to your device. ink of what a juicy piece of low-hanging fruit the cloud is to state-sponsored cyber-ter- rorists like the Chinese Army's PLA Unit 61398, a group dedicated to cyber espionage. To counter this threat, Palo Alto devel- oped the Prisma family of products, designed specifically for cloud security. is seamless product protects the data from cloud, to branch offices, to mobile users, anywhere in the world. To build on its Prisma suite, the company acquired PureSec and Twistlock, two high-level serverless security platforms. ese two examples, Cortex and Prisma, highlight Palo Alto's commitment to remain- ing a step ahead of the world's black-hat hackers. And their efforts continue to pay off: revenues are growing at a double-digit annual clip, while subscriptions grew 38% from the prior year. e demand for proven cybersecurity solutions is only going to increase in 2020. And most companies will pay up for bench- mark leaders like Palo Alto for their needs. We expect a breakout year for PANW shares. Due to the increasing worldwide threat of cyberattacks, the leading companies in this industry can thrive in all economic conditions. Think of what a juicy piece of low-hang- ing fruit the cloud is to state-sponsored cyber-terrorists like the Chinese army's PLA Unit 61398, a group dedicated to cyber espionage. A 2020 BreAkout Pick PANW @ $240

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