Yahoo Finance With 82% ownership in Palo Alto Networks, Inc. (NASDAQ:PANW), institutional investors have a lot riding on the business
Key Insights
Significantly high institutional ownership implies Palo Alto Networks' stock price is sensitive to their trading actions
The top 25 shareholders own 46% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of Palo Alto Networks, Inc. (NASDAQ:PANW) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 82% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And things are looking up for institutional investors after the company gained US$5.3b in market cap last week. One-year return to shareholders is currently 60% and last week’s gain was the icing on the cake.
In the chart below, we zoom in on the different ownership groups of Palo Alto Networks.
Check out our latest analysis for Palo Alto Networks
What Does The Institutional Ownership Tell Us About Palo Alto Networks?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
We can see that Palo Alto Networks does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Palo Alto Networks' earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Palo Alto Networks is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 8.5%. With 7.6% and 3.9% of the shares outstanding respectively, BlackRock, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Palo Alto Networks
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our information suggests that Palo Alto Networks, Inc. insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$910m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Palo Alto Networks. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Palo Alto Networks has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
