Prolonged Uptrend Persists: One Stock with Split that Warrants Purchase for Your 2025 New Year's Vow
High-grade corporations often generate substantial worth for their shareholders in the long term. At times, this leads to their stock price skyrocketing to hundreds or even thousands of dollars, making it tricky for individual investors to invest.
Companies can resolve this dilemma with a stock split, boosting the number of shares they have in circulation while simultaneously reducing the stock price proportionately. For instance, a 10-for-1 split would amplify a company's share count tenfold, and reduce its price-per-share to one-tenth of what it was previously.
These actions do not affect the worth of the underlying company in any way — the lowered share price is purely cosmetic. A split simply makes it simpler for small investors to buy into a venture.
2024 was an outstanding year for stock splits.
The S&P 500 (^GSPC -0.43%) is presently in a raging bull market, and there's no sign of it slowing down. Several prominent companies experienced significant upticks in their stock prices throughout 2024 and carried out stock splits to make them more affordable:
- Nvidia performed a 10-for-1 split on June 10, bringing its stock price down from $1,200 to around $120.
- Chipotle executed a 50-for-1 split on June 26, reducing its price-per-share from $3,283 to just $66.
- Broadcom implemented a 10-for-1 split on July 12, dropping its stock price from $1,700 to $170.
- Palo Alto Networks (PANW -1.22%) underwent a 2-for-1 split on Dec. 13, which lowered its stock price from $400 to $200.
As 2025 approaches, now could be an opportune time for investors to explore new opportunities. These companies were some of the most valuable creators in 2024, and each has strong momentum heading into the new year.
However, Palo Alto presents a particularly alluring opportunity. It stands out as a leader in the cybersecurity sector, and as cyber threats persistently increase, demand for its software is likely to persistently climb in 2025. Plus, the company is integrating artificial intelligence (AI) across its product portfolio, which is generating significant value for both clients and shareholders.
Therefore, investing in Palo Alto stock might be an excellent addition to your list of New Year's resolutions.
A leader in AI-powered cybersecurity
Palo Alto operates three cybersecurity platforms covering cloud security, network security, and security operations, each comprising countless individual products. The company is integrating AI into as many of those products as feasible in its efforts to help its clients eradicate threats more swiftly and accurately.
Large organizations typically have security operations centers staffed with analysts and experts who remediate cyber incidents. Palo Alto believes that too many of these centers rely on human-led processes that are becoming increasingly overwhelmed by the frequency of modern attacks. That's why it introduced Cortex XSIAM — a security operations center platform powered entirely by AI that comprises more than 400 algorithms for automation prioritization.
XSIAM clients have had considerable success. One oil and natural gas company reduced the number of cybersecurity incidents requiring human investigation by 75%, and a healthcare provider now resolves 90% of incidents with automation (up from 10% previously).
Organizations also encounter fresh risks when implementing AI into their operations. Many of them are inputting their sensitive data into third-party AI models (like those from OpenAI and Anthropic) to build software, which creates a new vulnerability. Palo Alto is working on a product portfolio called Secure AI by Design that it hopes will address some of those challenges. It could be a significant growth driver as AI adoption expands.
Palo Alto's revenue growth is accelerating
The cybersecurity sector used to be incredibly fragmented. Providers specialized in specific products, so businesses constructed their security stacks using multiple vendors. Palo Alto changed this trend by becoming a true one-stop shop via its three platforms.
Palo Alto asserts that the lifetime value of a customer that uses all three of its platforms is 40 times higher than the value of a customer using only one, so this strategy makes sound sense. The company started focusing on "platformization" around a year ago by offering customers free periods to entice them to transition away from other cybersecurity providers. That led to a temporary slowdown in its revenue growth, but the strategy is now starting to bear fruit.
During its fiscal 2025 first quarter, which ended Oct. 31, Palo Alto generated $2.1 billion in total revenue. That was a 14% increase from the prior-year period, marking an acceleration from the 12% growth it delivered in its fiscal 2024 Q4.
Palo Alto also reported $4.5 billion in annual recurring revenue (ARR) from next-generation security (NGS) products at the end of Q1, which was a 40% increase from the year-ago period. Palo Alto describes NGS products as those that result from its substantial investments in innovation, so the AI products within the Cortex platform (like XSIAM, for example) fit into that category.
Moreover, the company states that more than half of the customers contributing NGS revenue are "platformed," so the fact that this segment delivered 40% ARR growth truly highlights the potential of platformization.
Palo Alto's shares have seen a surge of 30% in 2024, approaching an all-time high. Despite this, its stock trades at a relatively affordable price-to-sales (P/S) ratio of 16.1, a figure lower than its rival, CrowdStrike.
CrowdStrike might warrant a higher premium considering it boosted its total revenue by 29% in its last reported quarter, surpassing Palo Alto's 14% growth. However, it's essential to consider that Palo Alto is a significant provider, with an NGS ARR of $4.5 billion, significantly more than CrowdStrike's total ARR of $4 billion. Moreover, Palo Alto's NGS revenue increased by 40%, suggesting that its current P/S ratio might be justifiably lower.
Palo Alto currently has 1,100 clients utilizing its platformization services, aiming to expand this number to 3,500 by fiscal 2030, potentially resulting in an NGS ARR of $15 billion. Under these circumstances, Palo Alto's stock would need to almost double in value over the next five years to preserve its current P/S ratio of 16.1.
There's a growing demand for solutions like 'Secure AI by Design', as indicated by a recent study from McKinsey and Company. The study revealed that 72% of businesses have implemented AI in at least one function, but only 8% employ it in five or more functions. Essentially, AI deployment is still at an early stage, with businesses requiring more cybersecurity tools to safeguard their sensitive data as they expand its use more extensively.
As Palo Alto continues to develop new products tailored for the AI era in 2025, its competitive valuation contrasted to its main competitor makes it an appealing investment option for the new year. Moreover, its recent stock split makes it more accessible for smaller investors.
Investing in Palo Alto stock could be a wise decision for 2025, given its leadership in the AI-powered cybersecurity sector and the increasing demand for such solutions. The company's stock split in 2024 made it more affordable for individual investors.
To capitalize on the potential growth of Secure AI by Design, a product portfolio designed to address challenges in AI adoption, investors might consider including Palo Alto stock in their New Year's resolutions.
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