PANW
Palo Alto Networks, Inc.
$330.30
Platform & Compounding FCF
85%
Two-stage FCF DCF
Strong
·
Conviction
Overvalued
Trading 67.8% above fair value
You pay
$330.30
Bear
$125.88
Fair
$196.81
Bull
$276.77
Bear
$125.88
-61.9%
9% stage 1 growth, 11% discount
Fair
$196.81
-40.4%
15% stage 1 growth, 11% discount
Bull
$276.77
-16.2%
20% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (15% base case)
Terminal Value % of EV
43%
Implied Market Multiple
89.1x
Market is pricing in (growth)
28.9%
vs 15.5% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $333.66 from 88 analysts, using a 35% weight on analyst consensus. That produces an estimated intrinsic value of $196.81 per share.
Warnings
Stock-based employee pay equals 114% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $333.66 (from 88 analysts). Our estimate is 63% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions