Fortinet FTNT shares have soared 80% since mid-March to easily top the cybersecurity market’s 45% jump and crush stay-at-home standouts such as Netflix NFLX and Amazon AMZN. This run includes a strong post-earnings release climb after its Q1 results wowed investors in early May.
The Simple Pitch
Fortinet is a cybersecurity company that offers various solutions, via both products and services. The firm aims to address a client’s “most critical security challenges” and utilizes AI-driven breach prevention and much more to help protect across rapidly expanding attack surfaces.
Fortinet protects everything from endpoints, such as laptops and smartphones to the cloud and more. FTNT’s back-end-processes that secure enterprises, service providers, and government organizations from digital intrusions and hacks are complicated, and the jargon and acronyms can be overwhelming. What investors do need to understand is that cybersecurity threats can’t be ignored, even by the smallest companies.
One estimate from Cybersecurity Ventures predictsthat the cost of global cybercrime damages will jump from $3 trillion in 2015 all the way to $6 trillion annually by 2021. This is the equivalent of almost 10% of the world’s economy.
Fortinet’s revenue climbed 20% for the second year in a row in fiscal 2019, after it jumped 17% and 26%, respectively in the two years prior. The firm’s Q1 fiscal 2020 revenue then surged 22%, with its service segment up 24% and its product unit up 18%.
FTNT’s service space accounted for 66% of total revenue, and management believes that it will continue to benefit from the remote work environment. “Our proprietary FortiASIC security processing unit (SPU) can deliver 10 times the VPN throughput capacity of comparable competitor solutions to support teleworkers,” CEO Ken Xie said in prepared Q1 remarks.
“This significant competitive advantage is one reason we believe we will continue to gain market share during a period of tougher economic conditions.”
Fortinet also provided second quarter guidance at a time when many firms withdrew their projections due to coronavirus uncertainty. The nearby chart shows that Fortinet stock has been on a strong run over the last three years, up 260% against its industry’s 55% average climb.
FTNT share are also up 25% since it reported its Q1 results. Luckily for investors who haven’t bought Fortinet yet, its shares have cooled off recently and sit about 8% off their recent highs.
Looking ahead, our Zacks estimates call for Fortinet’s fiscal 2020 revenue to climb 16% to reach $2.50 billion, with its FY21 sales expected to jump another 15.4% higher to hit $2.89 billion. At the bottom end of the income statement, its adjusted EPS figures are projected to climb 14% and 17.5%, respectively over this same stretch.
Fortinet’s longer-term earnings revisions have also trended completely in the right direction to help it earn a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grade for Momentum and “B” for Growth in our Style Scores system.
FTNT also boasts a solid balance sheet and appears worth considering for its ability to expand during the current market conditions. And longer-term investors might want to think about scooping FTNT up because Fortinet provides exposure to the growing tech-based economy.
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