FTNT - Up or Down?
Prepared by: Kalyaa Pradeep for TheoryOfStocks, on May 04, 2024
Stock Information
| Company Name | Fortinet Inc |
| Symbol | FTNT |
| Market Cap | $44.94B |
Fortinet Inc
Fortinet (Nasdaq: FTNT) is an American multinational corporation headquartered in Sunnyvale, California. It develops and sells cybersecurity solutions, including but not limited to physical products such as firewalls, plus software and services such as anti-virus protection, intrusion prevention systems and endpoint security components.. This belongs to TECHNOLOGY sector & classified under COMPUTER PERIPHERAL EQUIPMENT, NEC industry
Analysis for Fortinet Inc
Our Approach
Our proprietary analysis employs a weighted average approach integrating both functional and technical parameters, tailored to the sector, industry, and microeconomic factors. This methodology assigns dynamic weights to the parameters, with a focus on recent trends, ensuring a nuanced evaluation for informed investment decisions
Price & EPS
The stock price movement of Fortinet (FTNT) over the past 12 months has displayed a mixed pattern. Beginning at $77.72 in July 2023, the price gradually declined, hitting a low of $52.56 by November 2023, indicating a consistent downward trend. However, there were intermittent recoveries, notably in December and January, pushing the price back up to $64.49. February 2024 saw further improvement, reaching $69.11. Despite these rebounds, the price retreated again in March and April, settling at $63.18 by April 2024. The latest data point of $58.88 in May 2024 suggests further decline. With an RSI of 46.58, the stock appears to be neither overbought nor oversold, and trading below both its 50-day and 200-day moving averages indicates a bearish sentiment. Considering the 52-week high and low of $81.24 and $44.12, respectively, the current price leans towards the lower end, indicating potential undervaluation or sustained downward pressure.
Revenue & Profit
Fortinet's revenue has shown a steady upward trajectory over the past four years, increasing from $2.59 billion in 2020 to $5.3 billion in 2023. This growth is mirrored in its gross profit, which rose from $570 million to $1.24 billion over the same period. However, the cost of revenue has also increased proportionally, indicating potential challenges in maintaining profit margins amidst expansion. Despite this, Fortinet has managed its debt well, with total debt remaining relatively stable around $1 billion, while its end cash position has fluctuated but generally remained healthy, standing at $1.06 billion in 2020 and $1.4 billion in 2023. The company's earnings per share (EPS) have shown consistent growth, reflecting its ability to translate revenue growth into profitability for shareholders. Overall, Fortinet appears to have a solid financial foundation, with consistent revenue growth, effective debt management, and improving profitability, suggesting a strong position in its market sector.
Other Aspects
From the last reported earnings and revenue for the first quarter ended March 2024, Fortinet (FTNT) surpassed earnings expectations by 4.88% and experienced a robust revenue growth of 7.21% year-over-year. The company revised its guidance for the second quarter and full year 2024. For the second quarter, Fortinet now anticipates non-GAAP earnings of $0.39 to $0.41 per share on revenue of $1.375 billion to $1.435 billion, exceeding the previous consensus earnings estimate of $0.39 per share on revenue of $1.39 billion. Additionally, the company adjusted its full-year 2024 guidance to non-GAAP earnings of $1.73 to $1.79 per share on revenue of $5.745 billion to $5.845 billion, from the previous guidance of earnings of $1.65 to $1.70 per share on revenue of $5.715 billion to $5.815 billion. FTNT pays no dividend and the Beta is 1.07. Proprietary Buy/Sell analysis is 19.36. Above 70 and below 30 represents an overbought and oversold conditions.
Conclusion: Sell
Despite positive factors, within the broader context, FTNT competes in a cybersecurity sector fraught with uncertainties; further examination reveals a 6% miss in billings and a plateauing gross profit. With a P/E of 38, even amid revised EPS and revenue projections, the stock is expected to remain relatively stagnant. Considering all the above in addition to some of the derived parameters of the stock in conjunction with its sector and macro economic conditions, our proprietary Weighted Average AI model, gives a rank of 6 - which represents SellAt the time of writing this article FTNT, is around $58.88.