Cantor Fitzgerald Analyst Holds Fortinet with Higher Price Target

By Don Francis, Editor
February 10, 2024 11:33 AM UTC
Cantor Fitzgerald Analyst Holds Fortinet with Higher Price Target

Cantor Fitzgerald's Yi Fu Lee assumed coverage on Fortinet (NASDAQ: FTNT) with a Hold rating. The analyst also raised their price target by 50% from $50 to $75.

Fortinet, a leading provider of cybersecurity solutions, recently released its Q4 and FY 2023 earnings report, which received mixed reviews from analysts. Lee, while acknowledging the company's in-line performance in 2023 as a positive step compared to the previous quarter, cautioned that it may take the first half of 2024 for the product and appliance headwinds to improve.

In terms of financials, Fortinet reported an EPS of $0.51 for Q4 2023, surpassing the Zacks Consensus Estimate by 18.6% and showing a 15.9% increase from Q4 2022. Service revenue also saw significant growth, reaching $927 million, a 24.8% increase from the previous year. Total revenue for the quarter stood at $1.415 billion, beating the Zacks Consensus Estimate by 0.33% and marking a 10.3% increase from Q4 2022. The company reported a gross margin of 78.5%, up 90 basis points year-over-year, while the operating margin slightly decreased to 32% from Q4 2022's 32.5%. The Board of Directors also announced an additional $500 million to the share repurchase program, bringing the total available for future repurchases to $1.03 billion.

For the full fiscal year 2023, Fortinet reported an EPS of $1.63, marking a 37% increase from FY 2022. Revenue reached $5.3 billion, a growth of 20.1% from the previous year, with service revenue accounting for $3.38 billion, a 28.1% increase. Billings for FY 2023 totaled $6.40 billion, up 14.4% from FY 2022. The company experienced an improvement in operating margin, which reached 28.4%, compared to the previous year's 27.3%. Additionally, Fortinet repurchased 27.2 million shares for $1.5 billion.

Looking ahead, Fortinet's management provided guidance for Q1 2024, expecting an EPS of $0.37 to $0.39 and revenue ranging from $1.3 billion to $1.36 billion. Billings are projected to be between $1.39 billion and $1.45 billion, with a gross margin of 76.5% to 77.5% and an operating margin of 25.5% to 26.5%. For the full fiscal year 2024, the company anticipates an EPS of $1.65 to $1.70, revenue in the range of $5.715 billion to $5.815 billion, service revenue between $3.92 billion and $3.97 billion, and billings of $6.4 billion to $6.6 billion. Gross margin is expected to be between 76% and 78%, with an operating margin of 25.5% to 27.5%.

Founder, Chairman & CEO Ken Xie expressed confidence in Fortinet's performance, highlighting the growth in Security Operations billings and the successful sales strategy shift. He also emphasized the company's platform strategy and its position as the leading provider of secure networking solutions and the number one firewall vendor in terms of units shipped.

In addition to Cantor Fitzgerald's analyst Yi Fu Lee, other analysts also updated their ratings and price targets for FTNT on February 7, 2024. Stifel Nicolaus's Adam Borg raised the price target by 50% from $52 to $78 and maintained a Hold rating on the stock. Wells Fargo's Andrew Nowinski increased the price target from $65 to $70, maintaining a Hold rating. BMO Capital's Keith Bachman raised the price target from $70 to $82 and maintained a Hold rating.

According to data from WallStreetZen, 27.8% of top-rated analysts currently rate FTNT as a Strong Buy or Buy, while 66.7% consider it a Hold. Only 5.6% of analysts recommend selling the stock.

The consensus forecast among analysts suggests that FTNT's next fiscal year will deliver an EPS of $1.09. If this prediction holds true, it would represent a 25.8% decrease in annual EPS compared to the previous year.

Since the release of Fortinet's latest quarterly report on February 6, 2024, the stock price has increased by 4.4%. Year-over-year, the stock has risen by 21.8%. However, during this period, FTNT has slightly underperformed the S&P 500, which has seen a 23.2% increase.

Fortinet, Inc., headquartered in Sunnyvale, California, offers comprehensive and automated cybersecurity solutions globally. The company's products include FortiGate hardware and software licenses, FortiSwitch for secure switching, FortiAP for wireless networking, and FortiAnalyzer for network logging and analysis. Fortinet also provides solutions for web application firewall, email gateway, endpoint protection, multi-factor authentication, and more.

As an analyst, Cantor Fitzgerald's Yi Fu Lee specializes in the Technology sector and is ranked in the top 44% of Wall Street analysts by WallStreetZen. Their average return stands at 6.2% with a win rate of 60%.

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