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What Makes Fortinet (FTNT) Stock a Potential Pick Right Now?
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The technology space continues to be investors’ favorite due to its dynamic nature. This field is anticipated to grow faster than ever before. Therefore, if you invest right, you can reap the benefits over time. Tech companies will continue to transform our world with each passing year. So, if you don’t want to be left behind, make sure you’re investing in quality tech stocks.
Below we have evaluated one technology company that has demonstrated remarkable share price performance so far this year. Fortinet, Inc. (FTNT - Free Report) generated high returns for investors in the year-to-date period and has the potential to exceed expectations in the days ahead.
The stock has gained approximately 27.3%, outperforming the Zacks categorized Computer-Integrated Systems industry’s return of just 4.9%.
Let’s look at the reasons behind Fortinet’s solid momentum.
What’s Driving the Stock?
The main reason behind the optimism surrounding the stock is the company’s better-than-expected fourth-quarter 2016 results reported on Feb 2. Also, Fortinet’s fourth-quarter adjusted earnings increased six folds, driven chiefly by 22.4% growth in the top line and better cost management.
The year-over-year revenue improvement was primarily aided by seasonal demand, improvements in sales productivity and success in selling multiple product deployments. A large number of deal wins and customer additions during the quarter also contributed to top-line growth.
An encouraging top- and bottom-line guidance for the first quarter and full-year 2017, way above the respective Zacks Consensus Estimate, also helped in boosting investors’ confidence about the company’s future prospects.
Upward Estimate Revisions
Over the last 60 days, the Zacks Consensus Estimate for 2017 and 2018 witnessed upward revisions. For 2017, the Zacks Consensus Estimate is currently pegged at 35 cents, up 6 cents from earnings of 29 cents projected 60 days ago. The Zacks Consensus Estimate for 2018 is currently pegged at 43 cents, compared with 38 cents projected 60 days ago.
Other Driving Factors
Fortinet’s network security solutions include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration. We believe that the company’s strategy of focusing on selling subscription-based services enabled it to generate more stable revenues and expand its margins. Subscription-based service is a high gross margin business (approximately 80%) compared to the hardware-centric model.
Furthermore, acquisitions have remained one of the key growth strategies for Fortinet. Over the last two years, the company made two important acquisitions – AccelOps and Meru Networks. These transactions have helped the company in strengthening cloud capabilities as well as expand its portfolio.
We believe that the industry has huge growth potential for the long term. It should be noted that the financial well being, brand image and reputation of enterprises, and governments are always exposed to cyber threats. Consequently, cyber security has become a mission-critical, high-profile requirement.
With constant technological advancements, organizations are increasingly adopting the “bring your own device” (BYOD) policy to enhance employee productivity with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.
Moreover, various independent research firms forecast strong demand in the years ahead. According to a Markets and Markets report, worldwide cyber security spending will reach $101 billion in 2018 and $170 billion by 2020.
Therefore, with its sustained focus on product innovations and strategic acquisitions, we feel Fortinet is well positioned to capitalize on the huge opportunity available in the space.
Also, Fortinet currently has a Growth Style Score of ‘A’ which indicates that the stock is more suitable for growth investors. The stock has long-term expected earnings per share growth rate of 20.6%, way higher than the industry’s average growth rate of 6.2%. The company flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Keeping these positives in mind, we believe that Fortinet is one such technology stock that deserves a place in investors’ portfolio.
Other Key Picks
A few other stocks worth considering in the broader technology sector are Applied Optoelectronics, Inc. (AAOI - Free Report) , Broadcom Ltd. (AVGO - Free Report) and Micron Technology Inc. (MU - Free Report) , all sporting a Zacks Rank #1. Applied Optoelectronics, Broadcom and Micron have an expected long-term EPS growth rate of 18.3%, 13.6% and 10%, respectively.
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What Makes Fortinet (FTNT) Stock a Potential Pick Right Now?
The technology space continues to be investors’ favorite due to its dynamic nature. This field is anticipated to grow faster than ever before. Therefore, if you invest right, you can reap the benefits over time. Tech companies will continue to transform our world with each passing year. So, if you don’t want to be left behind, make sure you’re investing in quality tech stocks.
Below we have evaluated one technology company that has demonstrated remarkable share price performance so far this year. Fortinet, Inc. (FTNT - Free Report) generated high returns for investors in the year-to-date period and has the potential to exceed expectations in the days ahead.
The stock has gained approximately 27.3%, outperforming the Zacks categorized Computer-Integrated Systems industry’s return of just 4.9%.
Let’s look at the reasons behind Fortinet’s solid momentum.
What’s Driving the Stock?
The main reason behind the optimism surrounding the stock is the company’s better-than-expected fourth-quarter 2016 results reported on Feb 2. Also, Fortinet’s fourth-quarter adjusted earnings increased six folds, driven chiefly by 22.4% growth in the top line and better cost management.
The year-over-year revenue improvement was primarily aided by seasonal demand, improvements in sales productivity and success in selling multiple product deployments. A large number of deal wins and customer additions during the quarter also contributed to top-line growth.
An encouraging top- and bottom-line guidance for the first quarter and full-year 2017, way above the respective Zacks Consensus Estimate, also helped in boosting investors’ confidence about the company’s future prospects.
Upward Estimate Revisions
Over the last 60 days, the Zacks Consensus Estimate for 2017 and 2018 witnessed upward revisions. For 2017, the Zacks Consensus Estimate is currently pegged at 35 cents, up 6 cents from earnings of 29 cents projected 60 days ago. The Zacks Consensus Estimate for 2018 is currently pegged at 43 cents, compared with 38 cents projected 60 days ago.
Other Driving Factors
Fortinet’s network security solutions include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration. We believe that the company’s strategy of focusing on selling subscription-based services enabled it to generate more stable revenues and expand its margins. Subscription-based service is a high gross margin business (approximately 80%) compared to the hardware-centric model.
Furthermore, acquisitions have remained one of the key growth strategies for Fortinet. Over the last two years, the company made two important acquisitions – AccelOps and Meru Networks. These transactions have helped the company in strengthening cloud capabilities as well as expand its portfolio.
We believe that the industry has huge growth potential for the long term. It should be noted that the financial well being, brand image and reputation of enterprises, and governments are always exposed to cyber threats. Consequently, cyber security has become a mission-critical, high-profile requirement.
With constant technological advancements, organizations are increasingly adopting the “bring your own device” (BYOD) policy to enhance employee productivity with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.
Moreover, various independent research firms forecast strong demand in the years ahead. According to a Markets and Markets report, worldwide cyber security spending will reach $101 billion in 2018 and $170 billion by 2020.
Therefore, with its sustained focus on product innovations and strategic acquisitions, we feel Fortinet is well positioned to capitalize on the huge opportunity available in the space.
Also, Fortinet currently has a Growth Style Score of ‘A’ which indicates that the stock is more suitable for growth investors. The stock has long-term expected earnings per share growth rate of 20.6%, way higher than the industry’s average growth rate of 6.2%. The company flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Keeping these positives in mind, we believe that Fortinet is one such technology stock that deserves a place in investors’ portfolio.
Other Key Picks
A few other stocks worth considering in the broader technology sector are Applied Optoelectronics, Inc. (AAOI - Free Report) , Broadcom Ltd. (AVGO - Free Report) and Micron Technology Inc. (MU - Free Report) , all sporting a Zacks Rank #1. Applied Optoelectronics, Broadcom and Micron have an expected long-term EPS growth rate of 18.3%, 13.6% and 10%, respectively.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>