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Palo Alto Networks, Inc. (PANW) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Palo Alto Networks, Inc. (PANW)

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Intrinsic Value (DCF)

Current$187.73
→
Intrinsic$170.19
-9%
$114.77$170.19$280.34
Market implies 25% growth for 5 years
PANW appears fairly valued — current price aligns with our DCF estimate.
At $188, the market prices in continued strong cash flow growth (25%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $115 → Bull $280. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →18%20%22%24%
8%$214$231$250$270
10%$146$158$170$183
12%$111$119$128$138
14%$89$95$102$110

Bull Case

  • Bull case ($280) offers 49% upside at 26% growth, 8% discount

Bear Case

  • Bear case ($115) implies 39% downside at 18% growth, 12% discount
  • Using 22% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$4.23B
Year 2$5.17B
Year 3$6.30B
Year 4$7.69B
Year 5$9.39B
Terminal$148.76B

📐 Model Inputs

Growth Rate22.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$3.47BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is PANW stock undervalued or overvalued?
🔴 OVERVALUED

PANW trades at $187.73 vs. our DCF-derived intrinsic value of $130.16, implying -30% downside. Using a 9.5% WACC and 22.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($191.78) suggests limited upside.

What is PANW's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.47B, projected at 22.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-1.93B net debt and dividing by 0.71B shares: Bear $88.13 | Base $130.16 | Bull $191.78. Current price $187.73 implies -30% to base case.

How is PANW's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 22.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($90.40B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.