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Bull of the Day: Fortinet (FTNT)

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Headquartered in Sunnyvale, CA, Fortinet Inc. (FTNT - Free Report) provides network security appliances and its flagship Unified Threat Management (UTM) network security solutions to enterprises, service providers, and government entities worldwide. Its solutions are designed to integrate multiple levels of security protection, including firewall, virtual private networking, antivirus, intrusion prevention, Web filtering, antispam, and wide area network acceleration.

Fortinet’s Q2 earnings marked its eighth consecutive bottom line beat, and overall, it was a strong quarter. Revenues of $441.3 million jumped over 21% year-over-year, while net income skyrocketed 114.3% from the prior-year period, both driven higher thanks to solid product sales and increased demand for the company’s hardware.

Product revenue grew 17% year-over-year, and service revenue was up 25% to $275 million. Total billings rose 20% to $513.4 million, while deferred revenue popped 27% to $1.47 billion compared to $1.16 billion at the end of Q2 2017.

As a result, Fortinet’s full-year guidance was increased to reflect these solid numbers, as well as the expectation that its product refresh cycle at the moment will continue to propel growth.

Full-year revenue is projected between $1.77 billion and $1.79 billion, with billings between $2.085 billion and $2.110 billion. Fortinet had previously guided for revenue between $1.715 billion and $1.735 billion. Non-GAAP EPS is now expected in the range of $1.63 and $1.67 compared to the previous range of $1.51 and $1.55.

During the conference call with analysts, CEO Ken Xie said “The competitive advantage of our Security Fabric architecture coupled with our cloud offering and customer FortiASIC technology are contributing to market share gains. We expect to continue to deliver above-market growth, balanced with profitability.”

Fortinet, Inc. Price and Consensus

Fortinet, Inc. Price and Consensus | Fortinet, Inc. Quote

Due to this outperformance, analysts have taken notice of FTNT’s overall strength; the company has seen 15 upwards revisions in the last 60 days, pushing the stock towards a Zacks Rank #1 (Strong Buy).

On top of this, the Zacks Consensus Estimate for fiscal 2018 has increased 14 cents over the past two months, now sitting at $1.66 per share. Next year looks pretty good too, and earnings could jump over 15%. The 2019 consensus estimate has increased from $1.75 per share to $1.91 per share over the same time period.

Shares of FTNT have been on a great run so far this year, are up about 110% year-to-date. And, the stock has gained around 118% in the past one-year period. In comparison, the S&P 500 is up around 8% and 17%, respectively. Its industry, Security, has been a solid performer as well, sitting in the top 11% out of all industries ranked by Zacks.

There’s no doubt Fortinet is seeing incredible revenue growth acceleration right now, and while current growth is being driven by the company’s product refresh cycle, CEO Xie believes there are still benefits to come. So, if you’re an investor looking for a security stock to add to your portfolio, make sure to keep FTNT on your list.

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