Fortinet's Integrated Cybersecurity Solutions Garner Positive Analyst Ratings

By Don Francis, Editor
February 10, 2024 11:32 AM UTC
Fortinet's Integrated Cybersecurity Solutions Garner Positive Analyst Ratings

Mizuho's Gregg Moskowitz raised their price target on Fortinet (NASDAQ: FTNT) by 16.7% from $60 to $70 on 2024/02/07. The analyst maintained their Hold rating on the stock.

Fortinet, a provider of integrated cybersecurity solutions, recently released its Q4 and FY 2023 earnings report. While the company reported better-than-expected Q4 billings, it faced a decline in product revenue, which was more significant than analysts had anticipated, at 10% year-over-year (Y/Y). However, Moskowitz remains optimistic, noting that management's growth guidance for FY 2024 is "in line to below estimates" but may ultimately prove to be "somewhat conservative."

In terms of Q4 2023 financials, Fortinet reported earnings per share (EPS) of $0.51, surpassing the Zacks Consensus Estimate by 18.6% and showing a 15.9% increase compared to Q4 2022. Service revenue for the quarter reached $927 million, a 24.8% increase from Q4 2022. Additionally, Fortinet's revenue of $1.415 billion exceeded the Zacks Consensus Estimate by 0.33% and represented a 10.3% increase from Q4 2022. The company achieved a gross margin of 78.5%, up 90 basis points (bps) Y/Y, while the operating margin slightly decreased from Q4 2022's 32.5% to 32%. Furthermore, the Board of Directors authorized an additional $500 million for share repurchases, bringing the total available for future repurchases to $1.03 billion.

For FY 2023, Fortinet reported EPS of $1.63, reflecting a 37% increase from FY 2022. The company's revenue for the fiscal year reached $5.3 billion, a 20.1% increase from FY 2022, while service revenue grew by 28.1% to $3.38 billion. Fortinet also reported billings of $6.40 billion, a 14.4% increase from FY 2022. The operating margin improved to 28.4% from FY 2022's 27.3%. During this period, the company repurchased 27.2 million shares for $1.5 billion.

Looking ahead, Fortinet's management provided guidance for Q1 2024, projecting 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 FY 2024, Fortinet anticipates an EPS range of $1.65 to $1.70, revenue of $5.715 billion to $5.815 billion, service revenue of $3.92 billion to $3.97 billion, billings of $6.4 billion to $6.6 billion, and gross margin of 76% to 78%. The operating margin for FY 2024 is projected to be in the range of 25.5% to 27.5%.

Founder, Chairman & CEO Ken Xie expressed satisfaction with the company's performance in Q4, highlighting the significant growth in Security Operations billings and SASE (Secure Access Service Edge) billings. Xie attributed this success to the sales strategy shift and improved execution of the sales teams. Fortinet's platform strategy, which emphasizes integrated security functions across on-premises and cloud environments, has resonated with enterprises worldwide. Furthermore, the company's FortiGate product line has established Fortinet as the leading firewall vendor in terms of units shipped.

Other analysts also provided updates on FTNT on February 7, 2024. Stifel Nicolaus's Adam Borg raised their price target by 50% from $52 to $78 but maintained a Hold rating on the stock. Wells Fargo's Andrew Nowinski raised their price target by 7.7% from $65 to $70 and maintained a Hold rating. BMO Capital's Keith Bachman increased their price target by 17.1% from $70 to $82 and also maintained a Hold rating.

According to data, 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 suggests that FTNT's upcoming year will result in earnings per share (EPS) of $1.09. If this forecast proves accurate, the company's next yearly EPS will experience a decline of 25.8% compared to the previous year.

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

It's worth noting that Mizuho analyst Gregg Moskowitz, who raised the price target on FTNT, is ranked in the top 2% of Wall Street analysts by WallStreetZen. With an average return of 12.6% and a win rate of 59.4%, Moskowitz specializes in the Technology sector.

Fortinet, Inc., headquartered in Sunnyvale, California, offers a wide range of integrated and automated cybersecurity solutions across various regions. The company's product portfolio includes FortiGate hardware and software licenses, FortiSwitch secure switching solutions, FortiAP secure wireless networking solutions, FortiExtender hardware appliances, FortiAnalyzer centralized network logging and analyzing solutions, and FortiManager scalable management solutions. Additionally, Fortinet provides various other products, such as FortiWeb web application firewall solutions, FortiMail secure email gateway solutions, FortiSandbox proactive detection and mitigation services, FortiClient endpoint protection, and FortiToken and FortiAuthenticator multi-factor authentication solutions. The company also offers security subscriptions, technical support, professional services, and training services. Fortinet serves customers across industries such as telecommunications, technology, government, financial services, education, retail, manufacturing, and healthcare.

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