We recently published a list of 12 Best Edge Computing Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Palo Alto Networks, Inc. (NASDAQ:PANW) stands against other best edge computing stocks to invest in according to analysts.
Tech stocks have definitely grabbed the spotlight in the tech world, especially with the rise of generative AI. But there’s more to the sector that could be worth investors’ attention. Edge computing, for example, is another area within tech that’s primed for significant growth. Also known as Mobile Edge Computing (MEC) or Multi-Access Edge Computing, edge computing aims to bring computing power closer to where data is generated instead of relying solely on centralized cloud systems. Sometimes called the “Third Act of the Internet” by the Linux Foundation, edge computing changes the game by moving data storage and processing closer to local network points. This shift is a major step in how we handle and interact with information.
A new forecast from the IDC, global spending on edge computing is projected to hit $228 billion in 2024, reflecting a 14% increase from 2023. This figure covers combined spending by enterprises and service providers on hardware, software, professional services, and provisioned services for edge solutions. The forecast predicts continued strong growth through 2028, with spending expected to approach $378 billion, driven by a robust double-digit compound annual growth rate (CAGR).
This growth is driven by the increasing demand for localized network infrastructure and computing power, fueled by the rise of the Internet of Things (IoT)—a network of connected devices. As more data is generated at the endpoints, the traditional network structure faces more strain. The rollout of 5G, which offers higher bandwidth and the ability to support more connected devices, is boosting IoT and driving the need for edge computing. At the same time, AI-optimized processors are providing the computing power necessary to expand the use of edge systems. The automotive industry is a great example of how edge computing and AI are driving rapid advancements. As cars increasingly adopt self-driving features, these technologies have become crucial for making real-time decisions and responses.
According to Fortune Business Insights, the global edge computing market, valued at $10.11 billion in 2023, is expected to grow from $13.66 billion in 2024 to a staggering $181.96 billion by 2032, reflecting a CAGR of 38.2%. This rapid expansion is driven by the increasing adoption of edge devices, such as mobile point-of-sale kiosks and smart cameras, as well as computational infrastructure enabling real-time data analysis at the source. Similarly, PwC had predicted that the global market for edge data centers will nearly triple, rising from $4 billion in 2017 to $13.5 billion in 2024. This growth is fueled by the ability of localized data centers to reduce latency, manage intermittent connections, and deliver storage and computational power closer to end-users.
Our Methodology
To create our list of the top edge computing stocks to invest in according to analysts, we reviewed various stock screeners and ETFs, selecting companies based on their upside potential as of December 17. The stocks are ranked by their average upside potential, from lowest to highest, according to price targets. We also included data on the number of hedge funds holding stakes in these stocks, based on Insider Monkey’s Q3 hedge fund data.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A cutting-edge computer lab full of IT experts monitoring the security of multiple systems.
Palo Alto Networks Inc. (NASDAQ:PANW)
Average Analyst Upside: 12.48%
Number of Hedge Fund Holders: 64
Palo Alto Networks, Inc. (NASDAQ:PANW) is a prominent American cybersecurity firm specializing in comprehensive security solutions for applications, users, and devices. Its Secure Access Service Edge (SASE) platform, Prisma Access, delivers advanced edge resource protection by integrating Firewall as a Service (FWaaS), threat prevention, DNS security, and data loss prevention (DLP), combined with the robust features expected from a leading network security provider.
The company recently posted strong financial results, reporting a 14% increase in total revenue to $2.14 billion and a 13% rise in earnings per share. Additionally, its Next-Generation Security Annual Recurring Revenue grew by an impressive 40%, surpassing $4.5 billion. However, calculated billings fell 14% year-over-year, missing analyst expectations. Following the earnings report, TD Cowen reaffirmed a Buy rating on the stock and raised its price target from $400 to $420.
Palo Alto Networks, Inc. (NASDAQ:PANW) continues to advance its platformization strategy, with notable achievements including the acquisition of QRadar SaaS, which contributed $74 million to its Next-Generation Security ARR, and the introduction of the Prisma Access Browser, which has already garnered over 115 new customers.
As of Q3 2024, 64 hedge funds tracked by Insider Monkey held stakes in Palo Alto Networks Inc. (NASDAQ:PANW).
Overall, PANW ranks 8th on our list of best edge computing stocks to invest in according to analysts. While we acknowledge the potential of PANW, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PANW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.