Read the full story here Web Link posted Friday, December 22, 2023, 8:49 AM

A Palo Alto police report, obtained exclusively by NBC Bay Area's Investigative Unit, reveals disturbing details about the California probe of a dog trainer charged in the disappearance of a Peninsula German shepherd and linked to the death of a French bulldog in North Reading, Massachusetts.

The Palo Alto Police Department launched an investigation early this year into Josephine Ragland, 28, after Carolina Bruchilari reported that a dog trainer, she hired through Thumbtack had not returned Scott, her 7-year-old purebred German shepherd on the scheduled date and attempted to return an imposter instead.

On that same day, Bruchilari says Ragland left behind the AirTag that was originally hanging from Scott’s collar.

On Jan. 2, when Ragland was supposed to return Scott to his family in Palo Alto, Ragland texted the owner, saying she had a family emergency, had to leave the dog with a third party and couldn’t facilitate the return, said Bruchilari when NBC Bay Area first interviewed her in January.

NBC Bay Area’s Investigative Unit looked into the bizarre case of a missing dog in the Peninsula. A trainer is accused of losing a German shepard, then trying to cover it up by giving the family another dog. Hilda Gutierrez has an update to a story they exposed earlier this year.

Investigators now say that on the day Ragland was supposed to return Scott, she was busy dropping off and picking up five other dogs from clients all over the Bay Area and passing through Palo Alto, where Bruchilari lives.

Another dog owner, who was also interviewed by police, shared a Ring camera video of that same day showing who appears to be Ragland picking up their dog in the North Bay.

Palo Alto’s report said that investigators reviewed Ragland’s activities around the time she was hired to train Scott, between Dec. 2022 and Jan. 2023 by tracking her phone location, Google accounts, Venmo, Zelle and bank transactions.

This is how they discovered that on the day Ragland did not return Scott. She was actively searching, for what police call “Scott’s substitute,” by sending a “flurry of emails” responding to Craigslist posters who advertised German Shepherds up for adoption.

The very next day, the report states Ragland traveled some 800 miles to Seattle, Washington to pick up the imposter dog and then back to Palo Alto. The Craigslist poster later told police that Ragland arrived solo in a black Tesla and had no idea she intended to provide the dog to someone else.

This version of events contradicts what Bruchilari says Ragland told her about the substitute dog when she confronted her.

“She told me that she didn't know that it was another dog, that this man gave her another dog," said Bruchilari.

A Humboldt County police report from January indicated that Ragland's boyfriend had come forward, saying Scott was under his care and had broken through a window, leaving a blood trail. He also asked to take the charges linked to his disappearance.

According to the Palo Alto report, the boyfriend promised to send a picture of the broken window to police, but never did. Humboldt County told NBC Bay Area's Investigative Unit that they did not verify the story before forwarding the information to Palo Alto police.

In their report, Palo Alto detectives suggest Ragland and her boyfriend were keeping the dogs in Myers Flat in Humboldt County, more than four hours north of the Peninsula.

A German shepard from Palo Alto disappeared while in the care of a dog trainer. NBC Bay Area’s Investigative Unit has learned the trainer is now facing charges in two different states. Hilda Gutierrez has more.

During a two-month period, Ragland allegedly took in 18 dogs, charging over $2,700 each for two weeks of training, continuing her business as usual even after Scott disappeared.

Clients reported to police and NBC Bay Area that Ragland refused to disclose her training location because of safety concerns, and those who did get their pets back say they received emaciated and visibly neglected dogs.

The Palo Alto report also notes that Ragland had expanded her dog training business to the East Coast under a different name.

In September, Ragland was charged with larceny and misleading police after a Massachusetts French Bulldog died in her care. She has pleaded not guilty to those charges.

In both states, clients told police and NBC Bay Area, they hired Ragland through the online service advertising app Thumbtack because she was verified, had a high rating and dozens of great reviews.

Thumbtack removed Ragland’s profile five days after the initial complaint from Bruchilari and told police they refunded some of Ragland’s clients. But they required them to sign non-disclosure agreements as a condition, something authorities said caused some hesitancy in working with law enforcement, according to the police report.

In a statement, Thumbtack in part said, they were able to verify Ragland’s prior reviews, meaning they were able to confirm they came from genuine Thumbtack customers, and added, "[They] actively encourage all affected customers to speak to the police [and] reached out to those who had engaged with Ragland [going back six months] to let them know she had been banned and that they should not work with her.”

Investigators suggest a possible motive for Ragland's actions, citing at least 10 visits to the Bear River Casino in Loleta during her stay in California, where they say she gambled thousands of dollars during the two-month period.

Police in the East Coast case also noted Ragland's admission of "issues with gambling."

Ragland now faces multiple theft felonies and a warrant for her arrest was issued in Santa Clara County on Nov. 10.

Despite the extensive investigation, the missing German Shepherd has not been located. The Palo Alto Police Department emphasize that the time taken for the investigation is not uncommon and the search for the dog continues.

Maintaining independence and editorial freedom is essential to their mission of empowering investor success. They provide a platform for their authors to report on investments fairly, accurately, and from the investor’s point of view. They also respect individual opinions––they represent the unvarnished thinking of their people and exacting analysis of their research processes. Our authors can publish views that they may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

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Introduction

If there's one thing I have highlighted in accurate articles, it's my increased focus on value stocks, given that the stock market valuation hints at subdued long-term total returns.

Generally speaking, this favors stocks with low valuations and/or decent yields, as they can expect a bigger part of future total returns to come from dividends.

I discussed all of this in my 2024 Outlook article, which was published on December 5.

So, why is this article about Palo Alto Networks (NASDAQ:PANW), a high-flying tech stock that has risen 111% in 2023?

Well, as I'm not a typical value investor (I look for the sweet spot between growth and value), I always have growth stocks on my watchlist to buy once opportunities appear.

This is what I wrote in my 2024 Outlook article (emphasis added):

I'm also buying growth stocks, albeit very carefully. I mainly do this to hedge myself against being wrong (I don't want to be entirely overweight in higher-yielding stocks and value plays). In this case, I'm buying proven stocks with good balance sheets and anti-cyclical demand. I'm not buying companies with lofty valuations, operations in highly competitive industries, and a high dependence on speculative stock market sentiment.

Hence, in this article, I will explain why I put the PANW ticker on my watchlist. Despite its accurate performance, I believe it offers value on stock price corrections.

So, let's take a closer look!

Cyber Security Is Where It's At

Palo Alto Networks may not be cheap, which is why I am waiting for a potential correction of this red-hot stock market. However, it offers anti-cyclical demand growth in one of the most important industries in the world.

The company is a global cybersecurity provider established in 2005 and headquartered in Santa Clara, California. It currently has a $93 billion market cap.

According to the company, it aims to create a safer world by empowering enterprises, organizations, service providers, and government entities to defend against sophisticated cyber threats.

As most of us may be aware, the massive rise in global connectivity comes with incredible risks.

Using Statista data (as of November 2022), they see that they are in a massive uptrend when it comes to cybercrime. The cybercrime the world witnessed before the pandemic is a walk in the park compared to what they should expect in the next few years.

With that in mind, Palo Alto Networks offers a range of products, subscriptions, and support services.

Hardware and software firewalls, SD-WAN, Panorama, and subscriptions like Advanced Threat Prevention, GlobalProtect, and Enterprise DLP are key components.

Cloud-delivered security services cover Advanced URL Filtering, DNS Security, IoT/OT Security, and more.

Prisma Access and Prisma SD-WAN enhance cloud security, while Prisma Cloud secures cloud-native applications.

It has a well-balanced revenue breakdown between subscriptions and support services.

Essentially, PANW adopts a holistic approach to cybersecurity, offering a suite of solutions that span across network security, cloud security, security operations, and threat intelligence.

This all-encompassing strategy makes sure that organizations can fortify their "digital perimeters" based on a "zero-trust" model.

What's interesting are the ML-Powered Next-Generation Firewalls.

These firewalls embed machine learning in the core, enabling real-time detection and prevention of zero-day threats.

Based on this context, PANW is at the right place at the right time, as evident by its historical sales growth.

Since 2012, PANW has grown its revenue by roughly 3,800%, with a notable acceleration after 2020, when the world witnessed the start of more rapid cybercrime growth (we also see this in the Statista chart above).

With that in mind, let's dig a bit deeper to find out how PANW is evolving and growing shareholder value.

PANW Remains In A Great Spot For Growth

During the November 29 UBS Technology Conference, the company elaborated on its operating environment and capabilities.

One of the most important things the company mentioned was that the financial impact of cyber attacks, with hackers demanding substantial ransom payments, has created a lucrative market for cybersecurity services.

Due to the minimal legal consequences faced by attackers, businesses are compelled to invest in robust cybersecurity measures to protect their assets and reputations.

There is growing recognition at the corporate level, including the C-suite and board of directors, regarding the critical importance of cybersecurity.

This heightened awareness translates into sustained cybersecurity budgets, indicating a consistent and robust demand for cybersecurity solutions.

Even more important, the adoption of artificial intelligence ("AI"), particularly precision AI in the cybersecurity domain, represents a significant business opportunity.

Companies like Palo Alto Networks are leveraging massive datasets, ingesting petabytes of data daily, to enhance their AI-driven cybersecurity capabilities.

Copilots, driven by generative AI, are expected to become table stakes in the industry within the next 12 to 18 months.

In an in-depth paper, Palo Alto notes that AI is also a great driver of efficiency to get more safety with fewer people.

Looking forward, the industry is poised for consolidation and "platformization."

As copilots become commonplace, managing multiple solutions from different vendors may pose a challenge for businesses.

This trend opens up opportunities for companies that can offer integrated solutions, potentially leading to market consolidation and the emergence of dominant platforms in the cybersecurity space.

In light of these developments, the company's venture into XSIAM addresses critical pain points in the cybersecurity industry, particularly in SOC (Security Operations Center) management.

The identified inflection point emphasizes the need for real-time security solutions, creating a market demand for innovative offerings like XSIAM.

Its success in reducing the meantime to remediate security incidents significantly positions XSIAM as a compelling solution for businesses seeking to enhance their cybersecurity capabilities.

Financially, Palo Alto Networks has generated an impressive $1 billion pipeline within a year of XSIAM's launch, reflecting robust market interest and potential revenue growth.

Meanwhile, the diverse customer base, including 5,300 Cortex customers, offers a solid foundation for tapping into existing relationships and expanding the market reach for XSIAM.

Recent Numbers Confirm A Strong Trend

In the first quarter of its 2024 fiscal year, Palo Alto reported impressive financial results.

• The company achieved a revenue of $1.88 billion, marking a 20% growth.
• Product revenue increased by 3%, while total service revenue experienced a robust 25% growth.
• Notably, subscription revenue reached $988 million, growing by 29%, and support revenue stood at $549 million, reflecting a 17% increase.

Unsurprisingly, PANW witnessed consistent revenue contributions across all geographic areas.

The Americas grew by 20%, EMEA by 19%, and JAPAC by 23%.

Especially the strength of PANW's next-generation capabilities was a key driver, with NGS Annual Recurring Revenue ("ARR") surpassing $3 billion for the first time, which translates to a remarkable 53% growth rate.

Strong contributions were observed across the entire NGS portfolio during the first quarter.

Total billings reached $2.02 billion, marking a 16% increase. Some analysts thought that this number was too low. This caused some post-earnings volatility.

However, the company attributed volatility in billings to ongoing payment conversations with customers. The company noted that discussions about payment terms and duration in final renegotiations had an impact on the total billings.

Palo Alto Networks employed various financial strategies. These included offering annual billing plans, financing through PANFS, and partner financing.

While these strategies did not impact demand or annual revenue, they introduced variability in total billings.

Furthermore, the company showed significant improvement in operating margins, expanding by 760 basis points year-over-year.

The gross margin for Q1 stood at 78%, increasing by 370 basis points. This improvement was attributed to higher gross margins and efficiencies across operating expense lines.

Adding to that, the company maintained a strong cash position, ending Q1 with cash equivalents and investments of $6.9 billion.

Cash flow from operations was $1.526 billion, and adjusted free cash flow for the quarter was $1.489 billion.

The company is expected to end this year with $3.8 billion in net cash, which means it has more cash than gross debt.

Thanks to this balance sheet, the company is protected against an environment of elevated rates and is in a good spot to acquire companies.

In its 1Q24 earning call, it discussed the definitive agreements to acquire two companies, Dig Security Solutions, and Talon Cyber Security, for approximately $232 million and $435 million, respectively.

These acquisitions are expected to close in the second quarter of the 2024 fiscal year.

Moreover, the company repurchased approximately 300,000 shares in the first quarter.

Over the past three years, the share count has increased by 8%, which is decent, given that a lot of tech stocks are diluting shareholders much more aggressively.

I expect the growth rate in shares outstanding to slow further as PANW becomes more mature and capable of buying back stock.

It also did not keep PANW from outperforming its tech peers.

Over the past twelve months, PANW has returned 110%, beating the impressive 55% performance of the tech-heavy QQQ ETF (QQQ).

This brings me to the valuation.

Valuation

Since its IPO, PANW shares have returned 26% per year.

Going forward, I expect the stock to outperform its peers, albeit with a potentially lower total return.

Using the data in the chart below:

• PANW is trading at a blended P/E ratio of 60.6x.
• This year (2024), EPS is expected to increase by 23%, followed by 17% expected growth in the 2025 fiscal year and 19% growth in the year after that.
• I believe that these growth rates warrant an EPS multiple between 50x and 55x, which would indicate an annual total return of 11% to 16%.

These numbers also imply a price target exceeding $400 (the current price is $295).

Nonetheless, I am not buying PANW at current prices.

The accurate surge in the stock market and the fact that the market has now priced in six interest rate cuts in 2024 lets me believe that it's important to be careful at current levels - especially when dealing with growth stocks.

While I am adding to certain value stocks, I prefer to buy PANW on 10% to 15% stock price weakness.

The key takeaway, however, is that I believe that PANW is one of the best tech stocks money can buy, benefiting from secular growth, great services and capabilities, and potential growth expectations that warrant a "lofty" valuation.

Takeaway

Despite my focus on value, Palo Alto stands out as a growth stock worth watching.

Despite its accurate surge, PANW's position in the cybersecurity industry, offering a comprehensive suite of solutions, positions it well amid the escalating threat of cybercrime.

The company's focus on AI-driven cybersecurity and the success of XSIAM demonstrate a strategic approach to evolving industry needs.

Financially robust, PANW reported strong Q1 results, marked by significant revenue growth, improved margins, and strategic acquisitions.

If I get a buying opportunity in 2024, I will likely use it to somewhat expand my tech-focused exposure.

PALO ALTO, CA - Palo Alto City Council voted earlier this year to allow outdoor eating areas built during the pandemic to stay permanently, but this week a new proposal was presented to the council that would change that.   

Two restaurant managers told KTVU that removing the parklets would seriously hurt their business. Still, there are other property owners who think the parklets are simply taking up too much space. 

"It’s a problem. They need places to park cars, but I think it’s worth walking a little further to have a better downtown experience," said  Breena Kerr, who says she used to live in Palo Alto. 

With the support of downtown property owners Premier Properties and Thoits Brothers, a new plan to Strengthen University Ave in Palo Alto emerged at Monday’s city council meeting. CSW Engineering Group presented the plan that would widen the sidewalks and create parallel parking spaces. But restaurants with parklets for outdoor dining have rejected the plan.  

"For one, they spent a lot of money building the parklets and the guests love sitting outside. It’s 50% of their revenue, so if they take away the parklets, they take away a big chunk of their revenue," said Suzanne Tetens, Oren’s Hummus Gen. Mgr.   

Back in September, Palo Alto City Council implemented a permanent parklet program with size limitations and annual fees. Though they approve of parklets, Oren’s Hummus and some customers agree that parking is an issue on University Avenue.  

"Everything’s two-hour parking. Maximum three-hour parking. So, they have to move their car every two to three hours. If you work an eight-hour shift, you have to move your car three times a day," said Tetens.   

"Parking has always been a problem. We’re addicted to their cars, but I think there are other ways to solve that. I mean, they could do some creative things with the parking that they do have," said Geoff Browning, of Palo Alto.     

Management at Local Union 271 on University Avenue also say they support keeping the parklets, because they too spent thousands of dollars building them, and their customers appreciate being outdoors.  

"Businesses should work with the city council to figure out a way to create more parking. Getting the parking off the street and having people in the street, I think is better and there are other places to park," said Martin, a Local Union 271 customer.   

The council is still looking for ways to redesign University Avenue. They asked city staffers to come up with alternative plans that include the current parklet program.

 KTVU reached out to the CSW and Thoits Brothers for comment, but they didn’t respond in time for this report.  

PALO ALTO — A Taco Bell was robbed at gunpoint early Wednesday morning in South Palo Alto, police said.

The suspect initially demanded money from the registers, which the victim handed over, police said. He then demanded any additional money in the store. The victim told the suspect he would get some from the back, but then ran out a rear door to safety.

Police said the victim reported the robbery to his supervisor, who in turn notified police.

Police did not provide a complete description of the suspect, who was said to be wearing a ski mask.Following the robbery, the suspect got into a dark-colored sedan and drove off on San Antonio Road toward Highway 101, police said.

There have been no reports of similar armed robberies in the city recently, police said.

Anyone with information related to the case can contact the police department at 650-329-2413; those wishing to remain anonymous can call or text 650-383-8984 or email paloalto@tipnow.org.

Maintaining independence and editorial freedom is essential to their mission of empowering investor success. They provide a platform for their authors to report on investments fairly, accurately, and from the investor’s point of view. They also respect individual opinions––they represent the unvarnished thinking of their people and exacting analysis of their research processes. Our authors can publish views that they may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of their editorial content, they keep a strict separation between their sales teams and authors to remove any pressure or influence on their analyses and research.

Read their editorial policy to learn more about their process.