Shares of Palo Alto Networks Inc. (PANW) declined 29% over the course of 2016, closing on Dec. 30 at $125.05 a share.

The cybersecurity industry pioneer saw its stock dip and regain first in February and again in June of 2016, with its latest fiscal 2017 first-quarter earnings in November sending the stock down more than 15%.

IoT, Cloud Drives Ahead Next-Gen Cybersecurity

Throughout 2016, Palo Alto has attempted to lead the wave of cybersecurity players capitalizing on a worldwide organizational shift to cloud computing. But some analysts say that Palo Alto, a leader in cybersecurity, has seen its heyday come to a close in light of a new era in security focused on providing solutions for emerging cloud, Internet of Things (IoT) and other digitalized revolutions. (See also: Internet of Things Poses Massive Cyberthreat.)

Confident in Long-Term Growth

After a half a decade of ultrahigh growth, Palo Alto has shown signs of a growth decline in the most recent quarters. In fiscal 2016 Q4, overall revenues grew 41% on a year-over-year (YOY) basis compared to 48% in Q3. In the most recent fiscal 2017 first quarter, revenues of $398.1 million represented a 34% increase YOY, falling short of analysts’ expected $400.1 million in sales.

To harness more recurring and long-term revenue streams, Palo Alto has attempted to bolster billings and deferred revenue, which grew 33% and 69% respectively in the most recent quarter.  

Moving ahead into 2017, bulls foresee Palo Alto as continuing to lead the industry despite some growing pains due to an industrywide restructuring away from bulky hardware system sales to recurring revenues, software and subscription-based businesses. Such sentiment is reflected in analysts reiterating strong stock positions, while lowering their price targets on PANW shares. (See also: UBS: Cybersecurity Heyday Is Over.)

 

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