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Fortinet's Billings Beat Expectations, Analyst Raises Price Target by 17.1%

By Don Francis, Editor
February 10, 2024 11:32 AM UTC
Fortinet's Billings Beat Expectations, Analyst Raises Price Target by 17.1%

BMO Capital's Keith Bachman raised their price target on Fortinet (NASDAQ: FTNT) by 17.1% from $70 to $82 on 2024/02/07. The analyst maintained their Hold rating on the stock.

In their report, Bachman highlighted that Fortinet's billings for the quarter exceeded the company's conservative guidance. This positive performance prompted the analyst to revise their price target upward following a review of Fortinet's Q4 and FY 2023 earnings report, which was released on February 6th, 2024.

Bachman also expressed optimism about Fortinet's future prospects, noting that the management's guidance for FY 2024 billings growth of 4% net of backlog burn appears conservative. The analyst believes that the strong billings beat in Q4, coupled with deferred revenue growth, suggests potential for higher growth in the coming year.

Fortinet's Q4 2023 earnings report revealed several positive results. The company reported earnings per share (EPS) of $0.51, surpassing the Zacks Consensus Estimate by 18.6% and Q4 2022's EPS of $0.44 by 15.9%. Service revenue for the quarter stood at $927 million, a 24.8% increase from Q4 2022. Overall revenue reached $1.415 billion, surpassing the Zacks Consensus Estimate by 0.33% and Q4 2022's revenue by 10.3%. Gross margin improved by 90 basis points year-over-year, reaching 78.5%, while the operating margin slightly decreased to 32% compared to Q4 2022's 32.5%.

For FY 2023, Fortinet reported EPS of $1.63, a 37% increase from FY 2022's $1.19. Revenue for the year reached $5.3 billion, up 20.1% from FY 2022, and service revenue increased by 28.1% to $3.38 billion. Billings for FY 2023 amounted to $6.40 billion, a 14.4% increase from FY 2022's $5.59 billion. The operating margin improved to 28.4% from FY 2022's 27.3%.

Looking ahead, Fortinet's management provided guidance for Q1 2024 and FY 2024. For Q1 2024, the company expects EPS in the range of $0.37 to $0.39, revenue between $1.3 billion and $1.36 billion, and billings between $1.39 billion and $1.45 billion. The gross margin is projected to be between 76.5% and 77.5%, while the operating margin is expected to range from 25.5% to 26.5%. For FY 2024, Fortinet anticipates EPS in the range of $1.65 to $1.70, revenue between $5.715 billion and $5.815 billion, and billings between $6.4 billion and $6.6 billion. The company expects a gross margin of 76% to 78% and an operating margin of 25.5% to 27.5%.

Founder, Chairman & CEO Ken Xie expressed satisfaction with the company's performance in Q4, highlighting the growth in Security Operations and SASE billings. Xie emphasized Fortinet's position as a leader in Secure Networking and the significant market share it holds in global firewall deployments. The CEO also emphasized the company's focus on consolidating the security capabilities of its extensive customer base onto the integrated FortiOS operating system.

In addition to BMO Capital's Keith Bachman, other analysts also updated their rating and price targets on Fortinet on February 7th, 2024. Stifel Nicolaus's Adam Borg raised their price target by 50% from $52 to $78 and 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. RBC Capital's Dan Bergstrom increased their price target by 18.3% from $60 to $71 and maintained their 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% recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Fortinet's upcoming year will deliver earnings per share (EPS) of $1.09. If the analysts' predictions are accurate, this would represent a 25.8% decrease in yearly EPS compared to the previous year.

Since Fortinet's latest quarterly report on February 6th, 2024, the stock price has increased by 4.4%. Year-over-year, the stock has shown positive growth of 21.8%. However, during this period, Fortinet has slightly trailed the performance of the S&P 500, which has grown by 23.2%.

Fortinet, Inc. is a global provider of comprehensive cybersecurity solutions. The company offers a range of hardware and software products, including firewall, intrusion prevention, anti-malware, virtual private network, application control, web filtering, and wide area network acceleration. Fortinet's solutions cater to various industries, including telecommunications, technology, government, financial services, education, retail, manufacturing, and healthcare. Headquartered in Sunnyvale, California, Fortinet was founded in 2000.

BMO Capital analyst Keith Bachman ranks in the top 1% of Wall Street analysts, according to WallStreetZen. With an average return of 16.2% and a win rate of 67%, Bachman specializes in the Consumer Defensive, Technology, and Consumer Cyclical sectors.

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