Security Software Stocks Get Boost from VAR Survey

Palo Alto Networks and CrowdStrike are recommended buys following strong VAR survey feedback, with Palo Alto Networks delivering the strongest channel feedback and CrowdStrike showing a V-shaped recovery in net sales performance. SentinelOne and Okta are rated neutral, with SentinelOne recording the largest sequential improvement in net sales performance but cautioning that consensus Net New Annual Recurring Revenue expectations may be too high.

Investors have received positive signals regarding the cybersecurity sector, with two prominent vendors, Palo Alto Networks (NASDAQ: PANW) and CrowdStrike Holdings (NASDAQ: CRWD), receiving strong recommendations based on recent surveys. Both companies have shown significant improvements in their quarterly performance metrics.

Palo Alto Networks, a leading security software vendor, received the strongest channel feedback in D.A. Davidson’s latest off-calendar Value-Added Reseller (VAR) survey. The brokerage reaffirmed its Buy rating on the stock, citing the company's "second largest quarter-on-quarter (Q/Q) improvement in net sales performance vs. plan & best out of all vendors" [1]. This performance, combined with the best pipeline strength and strong win rates against competitors, has bolstered confidence in the company's fiscal fourth-quarter (FQ4) annual recurring revenue (ARR) and remaining performance obligation (RPO) attainment.

CrowdStrike, another cybersecurity giant, has also shown a notable recovery in its net sales performance. According to the same survey, CrowdStrike's net sales performance has improved for the third straight quarter, although it remains middle of the pack compared to peers [1]. The company has also reported the highest percentage of VARs closing the quarter early and a record high mix of VARs reporting strong traction in Cloud Security.

While both Palo Alto Networks and CrowdStrike have received strong endorsements, other vendors such as SentinelOne (NYSE: S) and Okta (NASDAQ: OKTA) have been rated neutral. SentinelOne, for instance, recorded the largest sequential improvement in net sales performance but was cautioned that consensus Net New Annual Recurring Revenue (NNARR) expectations may still be too high [1]. Okta, on the other hand, posted the third-largest sequential improvement in net sales performance but continued to trail most vendors in terms of pipeline strength and win rates [1].

Investors should keep an eye on upcoming earnings reports, particularly for CrowdStrike, which is set to release its earnings on August 27, 2025. Analysts predict a quarterly revenue of $1.15 billion, up 19.22% from the year-ago period, and a Zacks Consensus Estimates of $3.5 per share and revenue of $4.78 billion for the full year [3].

References:
[1] https://finance.yahoo.com/news/buy-2-security-software-stocks-110247070.html
[2] https://site.financialmodelingprep.com/market-news/fmp-cantor-fitzgerald-maintains-overweight-on-sentinelone-ahead-of-earnings
[3] https://finance.yahoo.com/news/why-crowdstrike-holdings-crwd-outpaced-214503512.html