In the fast-evolving world of technology, cybersecurity has taken center stage. With global cybersecurity revenue set to hit $500.7 billion by 2030, the race to protect data is fierce, and the stakes keep rising as artificial intelligence (AI) and digitization fuel advanced threats like deepfakes and cryptojacking.
Cybersecurity player Fortinet, Inc. (FTNT), known for its cloud-based security solution, FortiSASE, could benefit from increased spending. FTNT stock has returned 34.4% on a YTD basis, clearly outpacing the S&P 500 Index’s ($SPX) gain of 19.6% during the same period.
Plus, Wall Street giant Morgan Stanley recently crowned Fortinet its “top pick,” citing a compelling valuation discount against peers and expected long-term growth. Here’s a closer look at Fortinet, which could be a smart pick for investors looking to tap into this thriving market.
About Fortinet Stock
California-based cybersecurity firm Fortinet, Inc. (FTNT), with a market cap of $60.7 billion, crafts robust security solutions, including firewalls and intrusion detection systems, with a portfolio of over 50 enterprise-grade products. With more than 730,000 customers relying on its trusted technology, Fortinet is at the forefront of the battle against cyber threats, ensuring businesses stay secure in a digital world.
Fortinet hit an all-time high of $83.77 on Oct. 14, showcasing impressive momentum with a 36.8% gain in just the last three months.
In terms of valuation, the stock is trading at 38.39 times forward adjusted earnings and 10.28 times forward sales, which is a discount to cybersecurity peers like Cloudflare (NET), Crowdstrike Holdings (CRWD), and Palo Alto Networks (PANW).
Fortinet Beats Q2 Estimates
Shares of the cybersecurity firm surged over 25% on Aug. 7 after its fiscal Q2 earnings release, which beat Wall Street’s expectations. Revenue rose 11% year over year to $1.43 billion, powered by a robust 20% surge in services revenue. Non-GAAP EPS hit $0.57, up 50% annually.
Total billings, Fortinet's invoiced-but-yet-to-be-realized revenue, held steady at $1.54 billion due to tough year-over-year comparisons, as backlog contributions boosted billings significantly the previous year. Unified SASE solutions took center stage, accounting for 23% of total billings, while its Security Operations offerings contributed 10%.
Known for superior integration and automation, Fortinet’s SecOps solutions - like the FortiAI, which incorporates GenAI tech - have been gaining traction, particularly among large enterprises, which make up 86% of SecOps and 82% of Unified SASE billings.
Fortinet exited Q2 with a healthy $3.3 billion in cash and short-term investments, up from $2.4 billion at the end of December 2023. Additionally, it generated $342 million in operating cash flow and $318.9 million in free cash flow, solidifying its cash reserves and positioning it strongly for continued growth.
Ahead of its fiscal Q3 earnings report on Thursday, Nov. 7, management expects Q3 revenue between $1.445 billion and $1.505 billion, with billings of $1.53 billion to $1.60 billion. The adjusted EPS range is $0.56 to $0.58.
Wall Street is looking for Q3 earnings of $0.52 per share, on an adjusted basis, with revenue expected at $1.48 billion, on average - just above the midpoint of management’s guidance.
What Do Analysts Expect for Fortinet Stock?
Morgan Stanley’s fresh outlook on Fortinet largely reflects a long-term view, as “we don't see [firewall] refresh activity picking up meaningfully for the next 2-3 quarters,” according to analysts led by Hamza Fodderwala.
However, with FTNT trading at a discount to peers and expected 20-30% upside to consensus free cash flow estimates for 2026, the stock earned “Top Pick” marks within its group. The firm backed an "Overweight" rating, and bumped up FTNT's price target from $69 to a Street-high of $105.
Overall, Wall Street rates FTNT a “Moderate Buy.” Of the 36 analysts covering the stock, 12 rate it a “Strong Buy,” one suggests a “Moderate Buy,” 22 analysts maintain a “Hold,” and one recommends a “Strong Sell.”
The stock currently trades at a premium to the average analyst price target of $76.55, while Morgan Stanley’s new Street-high forecast implies expected upside of more than 33%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
