HSBC Analyst Downgrades Fortinet (NASDAQ: FTNT) to Sell, Citing Sales Growth Concerns

By Don Francis, Editor
February 10, 2024 11:34 AM UTC
HSBC Analyst Downgrades Fortinet (NASDAQ: FTNT) to Sell, Citing Sales Growth Concerns

HSBC's Stephen Bersey downgraded their rating on Fortinet (NASDAQ: FTNT) from Hold to Sell on 2024/02/07. The analyst also announced a $57 price target.

Fortinet, a provider of cybersecurity solutions, recently reported its fourth-quarter and full-year 2023 earnings. The company's Q4 earnings exceeded expectations, with EPS of $0.51, beating the Zacks Consensus Estimate by 18.6%. Revenue for the quarter also surpassed expectations at $1.415 billion, reflecting a 10.3% increase from the previous year.

Despite the positive earnings report, Bersey downgraded Fortinet's stock due to concerns over the company's sales growth slowdown and operating margin erosion. In a statement, the analyst explained, "the slowdown in the company's sales growth and the operating margin erosion will continue for the foreseeable future."

HSBC's cautious stance on Fortinet's end-market demand reaccelerating in the second half of 2024 and 2025 also contributed to the downgrade. While some analysts may be more optimistic about the company's future prospects, HSBC's rating change reflects a more pessimistic outlook.

Other analysts have also revised their ratings and price targets for Fortinet. Stifel Nicolaus's Adam Borg raised their price target from $52 to $78 and maintained a Hold rating on the stock. Wells Fargo's Andrew Nowinski increased their price target from $65 to $70 and also maintained a Hold rating. BMO Capital's Keith Bachman raised their price target from $70 to $82 and maintained a Hold rating as well.

According to data from WallStreetZen, 27.8% of top-rated analysts currently 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 is that Fortinet's upcoming year will deliver earnings per share (EPS) of $1.09. If the analysts' predictions hold true, FTNT's next yearly EPS will be down by 25.8% compared to the previous year.

Since Fortinet's latest quarterly report on 2024/02/06, the stock price has increased by 4.4%. Year-over-year, the stock is up 21.8%. However, during this period, Fortinet has been trailing behind the S&P 500, which has seen a 23.2% increase.

Fortinet, Inc. provides comprehensive cybersecurity solutions globally, offering hardware and software licenses for various security and networking functions. The company's product portfolio includes firewall, intrusion prevention, anti-malware, virtual private network, and web filtering, among others.

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