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Is the Time Ripe to Build Position in Fortinet (FTNT)?

Buy or sell dice

If you are planning your portfolio, then Fortinet Inc.FTNT can be a wise pick.

Shares of the company have been escalating since it reported better-than-expected fourth-quarter 2017 results. The indicators of a stock's bullish run include a rise in its share price and continued uptrend in estimates.

Fortinetregistered solid returns of approximately 27.7% in the last one year, outperforming the Zacks categorized Computer - Integrated Systems industry's gain of 23.3%.

Estimate Revisions

In the last 60 days, the Zacks Consensus Estimate for Fortinet's fiscal 2017 witnessed upward revisions. The Zacks Consensus Estimate for fiscal 2017 is now pegged at 35 cents per share compared with 29 cents projected over the same time frame.

Digging Into the Earnings Details

The network security solution provider's adjusted earnings per share (excluding one-time items but including stock-based compensation) came in at 18 cents, higher than the Zacks Consensus Estimate of 8 cents. Moreover, on a year-over-year basis, the company's adjusted earnings jumped sixfold, driven primarily by strong top-line growth and better cost management.

Fortinet reported fourth-quarter revenues of $362.8 million, up 22.4% year over year, and beat the Zacks Consensus Estimate of $352 million. Segment wise, Product revenues increased 9.8% year over year to $158.9 million, while Services revenues surged 34.4% to $203.9 million.

The year-over-year 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 the top-line growth.

Buoyed by a better-than-expected fourth-quarter performance, Fortinet provided a strong outlook for first-quarter and full-year 2017.

For the first quarter, management expects revenues in the range of $330-$335 million and non-GAAP earnings per share of 15-16 cents. The Zacks Consensus Estimate for revenues and earnings is pegged at $335 million and 2 cents, respectively.

For 2017, management expects revenues in the range of $1.470-$1.480 billion and non-GAAP earnings per share of 87-89 cents. The Zacks Consensus Estimate for revenues and earnings is pegged at $1.479 billion and 35 cents, respectively.

Encouraging top and bottom-line guidance also helped in boosting investors' confidence in the company.

Other Driving Factors

Fortinet's network security solutions include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration.

We feel the industry has huge growth potential. Note 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 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.

Keeping these positives in mind, we believe that Fortinet is one such technology stock that deserves a place in investors' portfolio.

Fortinet also delivered positive earnings surprises of 125% in the last quarter. At this time, Fortinet's stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'D'. However, the stock was allocated a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Hence, there is still a lot of momentum left in this Zacks Rank #1 (Strong Buy) stock, which is evident from its long-term earnings growth rate of 20.6%.

The stock is in the spotlight with striking performances on the back of solid earnings results and robust growth projections. Keeping this in mind, we perceive that investing in this stock will yield strong returns in the short term.

Other Stocks to Consider

Other stocks worth considering in the broader technology sector are Seagate Technology plc STX , Western Digital Corporation WDC and Micron Technology, Inc. MU , all sporting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here

Seagate, Western Digital and Micron have a long-term expected earnings growth rate of 8.17%, 12.11% and 10%, respectively.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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Seagate Technology PLC (STX): Free Stock Analysis Report

Fortinet, Inc. (FTNT): Free Stock Analysis Report

Micron Technology, Inc. (MU): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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