Palo Alto Networks, Inc.

(NASDAQ Global Select)
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Bullish +75

2 Bad News Buys: Why Palo Alto and Zscaler Are Screaming Deals - MarketBeat

AI-generated analysis

πŸ“‰ Both Palo Alto Networks and Zscaler have sold off sharply from peaks, dropping up to 55% from troughs and over 20% in 2026, creating long-term low entry points.

πŸ’° Companies offer industry-leading gross margins ranging from 70% to 80%, significantly higher than legacy hardware-based security providers.

πŸ“ˆ Technical indicators show oversold conditions with stochastic oscillators at historical lows and MACD divergence suggesting a potential market bottom.

🏦 Institutional activity has shifted from heavy selling in Q3 2025 to aggressive buying in Q4 2025 and early 2026, accumulating over $2 for every $1 sold.

πŸ”’ Palo Alto Networks offers more than 20 products across cloud, networking, and systems security, while Zscaler leads in cloud-native zero-trust architecture.

πŸ“Š The cybersecurity industry is expected to grow at a 10% to 15% CAGR over the next decade, with leaders growing at accelerated rates.

🎯 Valuation analysis suggests PANW trades near 40x current earnings and ZS near 36x, pricing in robust growth outlooks.

πŸš€ Forecasts project Palo Alto Networks growing at a high-teens CAGR and Zscaler at a low-to-mid 20% CAGR over the next decade.

πŸ’‘ Deep-value territory relative to 2035 consensus implies potential 100% upside for PANW and nearly 200% upside for ZS to align with market averages.

πŸ›‘οΈ AI drives efficiency for businesses but also empowers cybercriminals, increasing the need for comprehensive security solutions provided by these leaders.

Bullish Signals
  • Both companies lead cybersecurity with unified, platform-based approaches that deliver industry-leading margins and above-sector revenue growth.
  • Institutional buying has overtaken selling since late 2025, indicating strong confidence from major investors despite recent price declines.
  • Short-covering is underway in both stocks, which typically provides a tailwind for share prices as shorts are forced to buy back shares.
  • Palo Alto Networks offers more than 20 products across cloud, networking, and systems security, providing comprehensive coverage in a fractured market.
  • Zscaler is considered the leader in cloud-native, zero-trust architecture, positioning it well for future digital transformation trends.
  • Valuations are trading at long-term lows with PANW near 40x earnings and ZS near 36x, suggesting limited downside risk.
  • Analyst consensus targets suggest significant upside potential, with Zscaler trading significantly below the low-end of its target range.
  • The cybersecurity industry is expected to grow at a 10% to 15% CAGR over the next decade, driven by digitization and regulatory requirements.
Risk Factors
  • Valuation concerns may continue to plague these markets, with PANW trading near 40X current year earnings and Zscaler near 36X.
  • Analysts played a role in the 2025 and 2026 stock price corrections by collectively reducing price targets, placing these stocks at the low end of target ranges.
  • Institutions sold heavily in Q3 2025, capping gains and driving prices lower before reverting to buying in subsequent quarters.
Full Analysis
Palo Alto Networks (PANW) and Zscaler (ZS) are identified as potential 'screaming deals' after selling off sharply from their peaks, pushing technical indicators and valuations to historically low levels that often foreshadow rebounds. Both companies lead the cybersecurity sector with unified, platform-based approaches that deliver industry-leading gross margins between 70% and 80%, significantly outperforming legacy hardware-based providers. Their share prices have dropped as much as 55% from peaks, trading at long-term lows despite robust growth trajectories driven by accelerating digitization, regulatory requirements, and AI adoption. Technical analysis suggests these stocks are oversold and ready to rebound, with monthly and weekly charts showing stochastic oscillators in low-signal ranges and moving-average convergence-divergence (MACD) divergence indicating bears are losing their grip. Institutional buying has overtaken selling since late 2025, with data revealing institutions accumulating shares at a pace of more than $2 bought for every $1 sold in Q4 2025 and early 2026. Short-covering is also underway in both names, providing additional support as price action aligns with prior support and resistance targets. Valuation metrics indicate deep-value territory relative to long-term forecasts, with PANW trading near 40x current year earnings and ZS near 36x. Analysts forecast the cybersecurity industry to grow at a 10% to 15% CAGR over the next decade, while leaders like Palo Alto (high-teens CAGR) and Zscaler (low-to-mid 20% CAGR) are expected to accelerate faster. This disparity suggests PANW could see 100% upside and ZS nearly 200% upside just to align with broad market averages as they grow into their forecasts, assuming they continue to command a market premium.