Palo Alto Networks has been a central figure in what traders are calling the “software apocalypse,” accounting for more than 5% of the troubled and troubled IGV Software ETF. While the software sector was being sold off indiscriminately, Palo Alto was quietly building a cybersecurity “fortress,” and I want to take advantage of options to own this important cyber name. Palo Alto Networks didn’t just survive the software selloff; They took advantage of it. While other companies struggle with fragmented tools, Palo Alto is pushing consolidation to become the security operating system. This “platformization” pivot (now offering free services to secure multi-year, high-value contracts) is a page straight from the Apple playbook. PANW YTD Mountain PANW Year to Date I believe this is an essential name for the US economy. Here are a few bullish reasons to own this cyber workhorse, which is part of my Essential 40 ETF (ESN): Palo Alto is moving away from selling individual “dot products” to offering an integrated platform. By offering free trials and consolidating services, they incur high switching costs. That’s why they don’t just sell a firewall; They are becoming the security operating system for the Fortune 500. This leads to larger, multi-year contracts that provide tremendous visibility into future revenue. Unlike many software companies that grow at any cost, PANW is a free cash flow machine with 28% margins. Remaining performance obligations (RPO) are over $12.6 billion, a 20% increase, indicating that the “platform” pipeline is not only intact; it accelerates. Palo Alto is one of the few cybersecurity companies successfully leveraging and monetizing AI today with its Precision AI offerings. Their AI tools help customers automate 90% of security operations, reducing threat remediation time from days to minutes. This leading cybersecurity stock has seen its risk reduced by the recent industry-wide selloff. With earnings scheduled for June 2nd, the market is currently offering a “discount” before management releases the next update on this important and important name. Risk Reversal: Sold the June 18 $190 put for $9.50. Bought the June 18 $200 call for $12.25. This risk reversal costs an investor $2.75, or $275 per lot. PANW was trading at around $198 at the time of implementation. An investor must be prepared to own PANW if the stock closes below $190 at expiration. DISCLOSURES: Kilburg is long this spread and PANW is long the Essential 40 ETF (ESN). All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the opinions of CNBC or its parent company or affiliates and may have previously been disseminated by them on television, radio, the Internet or any other medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR RECOMMENDATION TO PURCHASE SECURITIES OR OTHER FINANCIAL ASSETS. The content is general in nature and does not reflect the individual circumstances of any individual. The above content may not be appropriate for your particular circumstances. Before making any financial decisions, be sure to seek the advice of your own financial or investment advisor. Click here for the full disclaimer.
