Fortinet (FTNT) Q4 Billings Beat Prompts Price Target Increase by Analyst

By Don Francis, Editor
February 10, 2024 11:28 AM UTC
Fortinet (FTNT) Q4 Billings Beat Prompts Price Target Increase by Analyst

ScotiaBank's Patrick Colville raised their price target on Fortinet (NASDAQ: FTNT) by 28.6% from $70 to $90 on 2024/02/07. The analyst maintained their Buy rating on the stock.

According to Colville, Fortinet delivered a "much-needed" Q4 billings beat, thanks to some large deals pulled in from Q1 2024 and pushed from Q3 2023. The company's Q4 and FY 2023 financial results were released on February 6, 2024.

Colville noted that Fortinet's management's FY 2024 billings outlook was in line with consensus, and the near-term guidance setup for the company "looks de-risked."

In Q4 2023, Fortinet reported earnings per share (EPS) of $0.51, which beat the Zacks Consensus Estimate by 18.6% and Q4 2022's $0.44 by 15.9%. The company's service revenue for the quarter was $927 million, up 24.8% from Q4 2022's $742.9 million. Additionally, Fortinet's revenue for Q4 2023 was $1.415 billion, beating the Zacks Consensus Estimate by 0.33% and Q4 2022's $1.28 billion by 10.3%. The company also reported a gross margin of 78.5%, up 90 basis points year-over-year, and an operating margin of 32%, slightly down from Q4 2022's 32.5%.

For the full year 2023, Fortinet reported EPS of $1.63, showing a 37% increase from FY 2022's $1.19. The company's revenue for FY 2023 was $5.3 billion, up 20.1% from FY 2022's $4.42 billion. Furthermore, Fortinet's service revenue for the year was $3.38 billion, up 28.1% from FY 2022's $2.64 billion. The company's billings for FY 2023 reached $6.4 billion, up 14.4% from FY 2022's $5.59 billion. Fortinet's operating margin for FY 2023 was 28.4%, up from FY 2022's 27.3%. The company also announced the repurchase of 27.2 million shares for $1.5 billion during the year.

Looking ahead, Fortinet's management provided guidance for Q1 2024, including an EPS range of $0.37 to $0.39, revenue of $1.3 billion to $1.36 billion, and billings of $1.39 billion to $1.45 billion. The company expects a gross margin of 76.5% to 77.5% and an operating margin of 25.5% to 26.5% for the first quarter of 2024. For the full year 2024, Fortinet's management guided an EPS range of $1.65 to $1.70, revenue of $5.715 billion to $5.815 billion, and billings of $6.4 billion to $6.6 billion. The company expects a gross margin of 76% to 78% and an operating margin of 25.5% to 27.5% for FY 2024.

Fortinet's Founder, Chairman & CEO Ken Xie commented on the company's performance, stating, "In Q4, Security Operations billings grew 44% year-over-year, and SASE billings increased 19% year-over-year, driven by our successful sales strategy shift and the improved execution of our sales teams." Xie also highlighted Fortinet's position as a leader in Secure Networking and the number one firewall vendor for units shipped, with FortiGates accounting for over half of the global deployment. The company aims to consolidate the security capabilities of over half a million customers onto its integrated FortiOS operating system, which covers over 30 networking and security functions across on-premises and cloud environments.

In addition to ScotiaBank's Patrick Colville, other analysts also updated their ratings and price targets for Fortinet on February 7, 2024. Stifel Nicolaus's Adam Borg raised their price target by 50% from $52 to $78 but maintained their Hold rating on the stock. Wells Fargo's Andrew Nowinski raised their price target by 7.7% from $65 to $70 and also maintained their Hold rating. BMO Capital's Keith Bachman raised their price target by 17.1% from $70 to $82 and maintained their Hold rating.

Currently, 27.8% of top-rated analysts rate FTNT as a Strong Buy or Buy, while 66.7% see it as a Hold. Only 5.6% recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that FTNT's upcoming year will deliver earnings per share (EPS) of $1.09. If the analysts are correct, FTNT's next yearly EPS will be down by 25.8% compared to the previous year.

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

ScotiaBank analyst Patrick Colville is ranked by WallStreetZen in the top 36% out of 4,470 Wall Street analysts, with an average return of 0.6% and a 43.3% win rate. Colville specializes in the Technology and Communication Services sectors.

Fortinet, Inc. provides broad, integrated, and automated cybersecurity solutions globally. The company's offerings include hardware and software licenses for FortiGate, which provides various security and networking functions, as well as products like FortiSwitch, FortiAP, FortiExtender, FortiAnalyzer, FortiManager, FortiWeb, FortiMail, FortiSandbox, FortiClient, FortiToken, and FortiAuthenticator. Fortinet also offers security subscription, technical support, professional, and training services. The company caters to various industries, including telecommunications, technology, government, financial services, education, retail, manufacturing, and healthcare. Fortinet was founded in 2000 and is headquartered in Sunnyvale, California.

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