Palo Alto To Boost Security Framework With Demisto Buyout

In a bid to further expand its foothold in the cybersecurity market, Palo Alto Networks (NYSE:PANW) recently announced its impending acquisition of security orchestration, automation and response company Demisto, which is likely to close in Palo Alto’s third quarter of fiscal 2019.

This buyout is expected to help Palo Alto incorporate artificial intelligence (AI) and machine learning to enhance the automation of its customers' security operations.

Per the agreement, it will pay $560 million in a combination of cash and stock. Moreover, Demisto’s products, which have helped reduce human supervision in cyber threat alerts by 95%, will be available to customers, post-acquisition.

The decision to acquire Demisto is in line with the company’s strategy to broaden its cyber security capabilities, enhance revenues and improve customer experience.

Nikesh Arora, chairman and CEO of Palo Alto Networks said, “Coupled with our Application Framework, Demisto will help us strengthen our commitment to security teams by delivering a platform that provides higher levels of integration, automation, and innovation to prevent successful cyberattacks."

Strategic Acquisitions to Boost Capabilities

Palo Alto has been making strategic acquisitions to boost growth. The buyout of LightCyber in February 2017, has expanded the company’s Next-Generation Security Platform.

Over the last few years, the company also completed three important buyouts to broaden its portfolio and global reach. Buyouts of Morta Security and Cyvera in 2014 expanded its product portfolio as well as the customer base.

Another acquired company, CirroSecure's resources and expertise have helped Palo Alto in expanding the functionality of its enterprise security platform and guard the SaaS collaboration products of salesforce.com (NYSE:CRM) , Alphabet’s (NASDAQ:GOOGL) Google Drive, Box and Dropbox (NASDAQ:DBX) better.

Moreover, the company expanded its endpoint detection and response capabilities with the acquisition of Secdo in April last year. Last October’s buyout of RedLock is expected to extend its leadership in cloud security.

The company’s cash reserve position is also quite strong with $3.2 billion worth of cash, cash equivalents and short-term investments recorded at the end of the last reported quarter. This places Palo Alto in a comfortable position to make strategic acquisitions.

We believe the company’s continued efforts to boost its organic and inorganic growth is resulting in increase in customer accounts and penetration of existing customers.

Demisto, which was founded in 2015, acquired more than 150 customers, of which Fortune 500 companies constitute 25%. Customers also include companies in healthcare, technology, financial services and other spaces. With the acquisition, Palo Alto will be able to reach out to the customer base of Demisto.

Palo Alto’s belief that its addressable market will be worth $24 billion by 2020 compared with $19 billion in 2017 is encouraging it to move forward in the cyber security market.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>