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Fortinet (NASDAQ: FTNT) Exceeds Expectations with Massive Quarter and Solid Guidance

By Don Francis, Editor
February 10, 2024 11:34 AM UTC
Fortinet (NASDAQ: FTNT) Exceeds Expectations with Massive Quarter and Solid Guidance

Wedbush's Daniel Ives raised their price target on Fortinet (NASDAQ: FTNT) by 14.7% from $75 to $86 on 2024/02/07. The analyst maintained their Buy rating on the stock.

Fortinet, a provider of broad, integrated, and automated cybersecurity solutions, recently released its fourth-quarter and full-year 2023 earnings report. The company exceeded expectations, delivering impressive results that caught the attention of analysts. Ives colorfully summarized the report, stating, "Despite the New York City cab driver being bearish on Fortinet into this print, the company came through in Brock Purdy-like fashion and delivered a massive quarter and solid guidance."

For the fourth quarter of 2023, Fortinet reported earnings per share (EPS) of $0.51, beating the Zacks Consensus Estimate by 18.6% and surpassing the previous year's earnings of $0.44 by 15.9%. Service revenue for the quarter reached $927 million, a significant increase of 24.8% compared to the same period in 2022. Total revenue amounted to $1.415 billion, surpassing the Zacks Consensus Estimate by 0.33% and outperforming the previous year's figure by 10.3%. The company also achieved a gross margin of 78.5%, representing a 90 basis point increase year-over-year.

Looking at the full-year 2023 results, Fortinet reported EPS of $1.63, marking a 37% increase from the previous year's earnings of $1.19. Revenue for the year reached $5.3 billion, showing a solid growth rate of 20.1% compared to the previous year's figure of $4.42 billion. Service revenue also experienced significant growth, reaching $3.38 billion, a 28.1% increase from the previous year's $2.64 billion. The company's operating margin for the year improved to 28.4%, up from 27.3% in 2022.

Fortinet's management provided guidance for the first quarter of 2024, projecting an EPS range of $0.37 to $0.39. They anticipate revenue to be in the range of $1.3 billion to $1.36 billion, with billings ranging from $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 full year 2024, management forecasts an EPS range of $1.65 to $1.70, revenue between $5.715 billion and $5.815 billion, service revenue ranging from $3.92 billion to $3.97 billion, and billings in the range of $6.4 billion to $6.6 billion.

Founder, Chairman & CEO Ken Xie expressed his satisfaction with the company's performance, noting the growth in Security Operations and SASE billings. He emphasized Fortinet's position as a leader in Secure Networking and the #1 firewall vendor for units shipped. Xie also highlighted the company's platform strategy, which aims to consolidate the security capabilities of its customers onto the integrated FortiOS operating system.

Following the release of the earnings report, several other analysts updated their ratings and price targets on FTNT. Stifel Nicolaus's Adam Borg raised their price target by 50%, from $52 to $78, while maintaining a Hold rating on the stock. Wells Fargo's Andrew Nowinski increased their price target by 7.7%, from $65 to $70, also maintaining a Hold rating. BMO Capital's Keith Bachman raised their price target by 17.1%, from $70 to $82, while keeping a Hold rating.

According to data from WallStreetZen, 27.8% of the top-rated analysts currently rate FTNT as a Strong Buy or Buy, while 66.7% view it as a Hold. Only 5.6% recommend selling the stock. The consensus forecast among analysts is that FTNT will deliver earnings per share (EPS) of $1.09 for the upcoming year. If the analysts' predictions are accurate, this would represent a 25.8% decrease in 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 is up 21.8%. However, during this period, FTNT has trailed the S&P 500, which has seen a growth of 23.2%.

Wedbush analyst Daniel Ives, who raised their price target on FTNT, is ranked in the top 2% of Wall Street analysts by WallStreetZen. With an average return of 9.8% and a win rate of 60.3%, Ives specializes in the Communication Services and Technology sectors, among others.

Fortinet, Inc., headquartered in Sunnyvale, California, provides cybersecurity solutions globally. Their offerings include hardware and software licenses for various security and networking functions, secure switching solutions, wireless networking solutions, network logging and reporting solutions, and endpoint protection solutions.

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