Palo Alto PANW - Valuation discussion regarding their 2 recent acquisitions

I read the recent Morningstar research reports and also looked at a number of the sell side analyst targets. And I wanna give some random noodling and look for feedbacks. I’ll start with the conclusion: It seems that the sell side is pretty bullish on this name mainly due to the secular trend of cyber security and the industry trend of vendor consolidation. Here is what I agree with the bullish points analyst report: - yes they are riding the “secular tailwinds” of 3 end markets given the trends: cloud migration, shift to zero trust security, and increase automation in cybersecurity. - yes they have a wide moat of offering a holistic security coverage rather than point solutions. Which means every existing customer is accretive as they can upsell their services and this also makes switching very costly for customers. - yes they are showing solid growth numbers: q1 2026: 16% sales growth with 140bps of margin expansion. RPO also grew 24%. FY22 - FY25: revenue almost doubled (to $9.22b) and earnings grew 280% (to $2.34b) These numbers are beyond good. And they have solid future outlook: next gen security ARR grew 29% to $5.9 b in q1 2026. This is more than half the 2025 top line - it certainly moves the needle. Here is what I am not sure about and want to ask all of you: - expectation of acquisition of CyberArk to close in q3 2026 (how does this deal benefit PANW and is this a catalyst or its mostly priced in?) - acquisition of Chronosphere (where does this land in PANW’s value chain? Is this acquisition accretive?) Valuation: - The fair value estimation from Morningstar is based on 2026 15x EV/Sales - $225. I don’t like this multiple as sales is only a proxy of how well the company is doing. But not enough to project how much it’s worth. Being a value investor, we are buying FCF, nothing more. - looking at P/FCF, it’s 35x. It’s not cheap but the last time the stock was cheaper in this metrics was before 2024. - PE doesn’t matter so we don’t look at it. I like this name and I am thinking about making it a trade. My ideas(1-2 year horizon trade idea): -technical set up: day candle is showing a rsi bottom divergence as the price closes below previous lows but RSI held above previous levels (32 vs 24). - Maybe a leaps call to maybe 2028 would be a good entry for a bounce (at which point I can sell monthly 0.3 delta covered calls for some income). And picking 2028 options is because Morningstar projects the fcf margin to be 40%+ by 2028 (synergy growth from acquisitions). Additional Questions: - speculation aside, from a value investing perspective: will you buy at the current price? - if you can only make one buy order this year, what price level would you buy PANW at? - a key risk for PANW is competition. To hedge, would you buy FTNT or CRWD and why? If so, what would be the ideal entry prices for you?