Is Fortinet Stock Finally a Buy After Earnings?

It was an interesting year for cybersecurity giant Fortinet (FTNT) in 2023, as the stock experienced more than one double-digit sell-off after earnings. However, the stock's most recent after-earnings price action - a post-report rally, thanks to better-than-expected guidance - suggests that the worst might finally be over for FTNT.

With the shares still trading at a discount to their 52-week high, is this tech stock a good buy at current levels? Here's a closer look at the forecast for Fortinet after earnings.

How Is Fortinet Stock Performing?

Cybersecurity company Fortinet (FTNT) offers services like network security, zero-trust access, security operations, and more. It operates under multiple brands, including FortiManager, FortiAP, FortiAnalyzer, FortiMail, FortiClient, and FortiSwitch, to provide services to government organizations, small businesses, enterprises, and security service providers. With over 705,000 customers, Fortinet has a global presence in countries like North America, Europe, Africa, the Middle East, and the Asia-Pacific region. 

Fortinet stock has gained about 18% over the past 52 weeks, but the stock hasn't had a smooth ride higher. After gapping sharply lower following its August and November earnings results, FTNT is still down 13.5% from last July's 52-week high.

Fortinet Finally Rallies After Earnings

After its previous two earnings reports, Fortinet stock suffered steep single-day losses of 25% and 13%, respectively. The heavy selling was sparked in large part by weak sales guidance - which the cybersecurity company lowered in August, and warned on again in November. 

However, after Fortinet reported its Q4 results on Feb. 6, the stock gained 3.7% in the next session. Adjusted EPS came in at $0.51, beating estimates of $0.43, while revenue of $1.42 billion also topped the consensus. Billings increased 8.5% year-over-year to $1.865 billion, due to strong SecOps and SASE segments. 

In Q4, SecOps billing increased by 44% while SASE grew 19% in the quarter. The company’s main billings came from its Secure Networking department with a total of 68% of total billings from here. 

Looking ahead, Fortinet expects its SecOps, SASE, and Secure Networking segments to increase from $150 billion to $208 billion by 2027. 

What's the Forecast for FTNT?

According to Fortinet, it expects Q1 2024 revenue to range between $1.3 billion and $1.36 billion, with billings projected between $1.39 billion and $1.45 billion. Non-GAAP operating margin is expected in the range of 25.5% to 26.5%, with non-GAAP gross margin projected between 76.5% to 77.5%. 

While the Q1 revenue and billings forecast came up slightly short of consensus expectations, Fortinet offered full-year guidance above estimates. Fiscal 2024 revenue is expected between $5.715 billion and $5.815 billion, with billings set to range between $6.4 billion and $6.6 billion. Services revenue is anticipated to arrive between $3.92 billion and $3.97 billion.

Currently, Fortinet stock is priced at 9.35 times expected 2024 sales, suggesting the shares are attractively priced relative to cybersecurity competitors like CrowdStrike Holdings (CRWD), at 20x forward sales, and Palo Alto Networks (PANW), at 14.51x sales.

Fortinet has a consensus “Moderate Buy” rating among analysts, though the mean price target of $70.94 is roughly flat with post-earnings price levels. The Street-high target of $90, meanwhile, implies expected upside of 28%. 

Among the 35 analysts following FTNT, 10 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 23 have a “Hold” rating for the stock.