Institutional investors are Palo Alto Networks, Inc.'s (NASDAQ:PANW) biggest bettors and were rewarded after last week's US$6.9b market cap gain

Key Insights

• Institutions' substantial holdings in Palo Alto Networks implies that they have significant influence over the company's share price
• 46% of the business is held by the top 25 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Palo Alto Networks, Inc. (NASDAQ:PANW) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 79% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 7.1% last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 69%.

Let's delve deeper into each type of owner of Palo Alto Networks, beginning with the chart below.

View 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 can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Palo Alto Networks, (below). Of course, keep in mind that there are other factors to consider, too.

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. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.9% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.5% and 4.0%, of the shares outstanding, respectively.

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 studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$971m of stock. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 20% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Palo Alto Networks (1 is significant) that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.