Fortinet's Price Target Lowered by Mizuho Analyst After Disappointing Q2 Earnings

Mizuho's Gregg Moskowitz lowered their price target on Fortinet (NASDAQ: FTNT) by 16% from $81 to $68 on 2023/08/04. The analyst maintained their Hold rating on the stock.

Moskowitz cited Fortinet's Q2 2023 earnings report, released on August 3rd, as the primary reason for the revised price target. The analyst noted that Q2's product revenue and billings growth decelerated to high-teens year-over-year, which was a surprising trend. Additionally, management provided a "disappointing Q3 outlook."

In the second quarter of 2023, Fortinet reported earnings per share (EPS) of $0.38, surpassing the Zacks Consensus Estimate of $0.34 and representing a significant increase of 58.3% compared to Q2 2022's EPS of $0.24. However, the company's revenue of $1.29 billion fell slightly short of the Zacks Consensus Estimate of $1.30 billion. Nevertheless, it still marked a substantial growth of 25.5% compared to the same period last year, when revenue stood at $1.03 billion.

Fortinet's gross margin for Q2 2023 was reported at 77.9%, reflecting a year-over-year increase of 140 basis points. The operating margin also showed improvement, rising by 210 basis points to reach 26.9%.

Looking ahead, Fortinet management provided guidance for the third quarter of 2023. They projected revenues ranging from $1.315 billion to $1.375 billion, a gross margin between 75.5% and 76.5%, and an operating margin between 24.5% and 25.5%. The company expects EPS in the range of $0.35 to $0.37 for Q3. For the full fiscal year 2023, Fortinet anticipates revenues between $5.35 billion and $5.45 billion, with a gross margin of 75.25% to 76.25% and an operating margin of 25.25% to 26.25%. EPS for the fiscal year is projected to be between $1.49 and $1.53.

Chairman, CEO & Founder Ken Xie expressed optimism about Fortinet's future, stating, "As a leading cybersecurity platform and secure networking vendor, we remain well-positioned for strong long-term growth as companies increasingly look to consolidate vendors and point products." Xie highlighted Fortinet's market share leadership in both SD-WAN and OT, and the company's focus on key growth markets such as Secure Networking, Consolidated Cybersecurity Fabric, Hybrid Cloud Security, and Operational Technology, which have a combined total addressable market of $122 billion in 2023.

In addition to Mizuho's rating change, other analysts also updated their ratings on FTNT on August 4th. Baird's Shrenik Kothari lowered their price target by 9.7% to $93 but maintained a Buy rating on the stock. Morgan Stanley's Hamza Fodderwala lowered their price target by 4.8% to $84 and maintained a Strong Buy rating. Wells Fargo's Andrew Nowinski also lowered their price target by 5.6% to $90, while also maintaining a Strong Buy rating.

According to WallStreetZen, 73.3% of top-rated analysts currently rate FTNT as a Strong Buy or Buy, while 26.7% see it as a Hold. No analysts have recommended or strongly recommended selling the stock.

The consensus forecast among analysts is that FTNT's upcoming year will deliver earnings per share (EPS) of $0.96. If the analysts' predictions are correct, FTNT's next yearly EPS will be down by 22% on a year-over-year basis.

Since Fortinet's latest quarterly report on August 3rd, the stock price has experienced a decline of 25.1%. However, on a year-over-year basis, the stock is still up by 7.9%. During this period, FTNT has trailed the performance of the S&P 500, which has seen an increase of 8.8%.

Gregg Moskowitz, the Mizuho analyst who revised the price target, is ranked in the top 14% of Wall Street analysts by WallStreetZen. With an average return of 2.9% and a win rate of 49%, Moskowitz specializes in the Technology sector.

Fortinet, Inc. is a provider of comprehensive cybersecurity solutions, offering hardware and software licenses for various security and networking functions. The company's product offerings include firewall, intrusion prevention, anti-malware, virtual private network, application control, web filtering, anti-spam, and wide area network acceleration. Fortinet also provides secure wireless networking solutions, secure switching solutions, and centralized network logging, analyzing, and reporting solutions, among others. The company sells its security solutions to customers in various industries, including telecommunications, technology, government, financial services, education, retail, manufacturing, and healthcare.

Fortinet, Inc. was founded in 2000 and is headquartered in Sunnyvale, California.

Want to get in touch? Email us at news@wallstreetzen.com.

WallStreetZen and Don Francis do not hold any positions in the companies mentioned in this article. The information and statistics provided herein are presented for general informational purposes only and may not be accurate, complete, or up-to-date. It should not be interpreted as a recommendation to buy or sell any stocks and should not be solely relied upon for making investment decisions. It does not take into account your financial situation or risk profile. All investors should conduct their own investment due diligence before buying a stock. WallStreetZen expressly disclaims any liability for the accuracy, reliability, or completeness of the analysts' information, price targets, ratings, or opinions.