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Fortinet's SecOps and SASE Traction Prompts Analyst to Raise Price Target

By Don Francis, Editor
February 10, 2024 11:35 AM UTC
Fortinet's SecOps and SASE Traction Prompts Analyst to Raise Price Target

Wells Fargo's Andrew Nowinski raised their price target on Fortinet (NASDAQ: FTNT) by 7.7% from $65 to $70 on 2024/02/07. The analyst maintained their Hold rating on the stock.

Nowinski's decision to increase the price target follows Fortinet's release of its fourth-quarter and full-year 2023 earnings report on February 6th, 2024. In the report, Fortinet exceeded expectations for Q4 2023, with earnings per share (EPS) of $0.51, beating the Zacks Consensus Estimate by 18.6%. The company's service revenue for the quarter also saw a significant increase of 24.8% compared to the same period in 2022.

Despite the positive Q4 results, Fortinet's management projected a conservative billings guidance for FY 2024, estimating a growth of just 2% year-over-year. Nowinski, however, believes this outlook is conservative, citing the early traction with Security Operations (SecOps) and Secure Access Service Edge (SASE). Nowinski stated, "looks conservative given the early traction with SecOps and SASE."

While Nowinski sees potential in Fortinet's SecOps and SASE, they also noted that the stock's valuation remains balanced as free cash flow is expected to decline by approximately 5% this year.

Fortinet's full-year 2023 results were also positive, with EPS of $1.63, a 37% increase from the previous year. The company reported revenue of $5.3 billion, a 20.1% increase from FY 2022, and service revenue of $3.38 billion, up 28.1% from the previous year. Billings for FY 2023 reached $6.4 billion, a 14.4% increase from FY 2022.

Looking ahead, Fortinet's management provided guidance for Q1 2024 and FY 2024. For Q1 2024, the company expects EPS 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. For FY 2024, Fortinet projects EPS 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.

Founder, Chairman & CEO Ken Xie commented on the company's performance, stating, "In Q4, Security Operations billings grew 44% Y/Y and SASE billings increased 19% Y/Y, driven by our successful sales strategy shift and the improved execution of our sales teams."

In addition to Nowinski's rating update, other analysts also revised their price targets for FTNT on February 7th, 2024. Stifel Nicolaus's Adam Borg raised their price target by 50%, from $52 to $78, and maintained a Hold rating on the stock. BMO Capital's Keith Bachman raised their price target by 17.1%, from $70 to $82, also maintaining a Hold rating. RBC Capital's Dan Bergstrom raised their price target by 18.3%, from $60 to $71, and kept a Hold rating.

As of now, 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 suggests that FTNT's upcoming year will deliver an EPS of $1.09. This projection indicates 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%. On a year-over-year basis, the stock has risen by 21.8%. However, during this period, FTNT has slightly trailed behind the S&P 500, which has seen a growth of 23.2%.

It is important to note that Wells Fargo analyst Andrew Nowinski is ranked in the top 6% of Wall Street analysts by WallStreetZen, with an average return of 14.8% and a 56.4% win rate. Nowinski specializes in the Technology sector.

Fortinet, Inc. is a cybersecurity solutions provider that offers integrated and automated solutions worldwide. The company's offerings include hardware and software licenses, secure switching and wireless networking solutions, centralized network logging and reporting solutions, and endpoint protection solutions, among others.

Incorporated in 2000, Fortinet, Inc. is headquartered in Sunnyvale, California.

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