With the rapid digitalization of businesses since the onset of the pandemic, cyberattacks have increased manifold. Since security breaches often lead to losses worth billions of dollars, companies have increasingly focused on cybersecurity solutions to protect their sensitive information.
Given the increased dependence on technology solutions today, many analysts believe cybersecurity stocks are recession-proof. Cyberattacks and security breaches are expected to keep evolving and rising. Therefore, cybersecurity solutions are expected to remain in demand, irrespective of the state of the economy.
Investors’ interest in cybersecurity stocks is evident from the ETFMG Prime Cyber Security ETF’s (HACK) 3.8% returns over the past three months.
Fortinet, Inc. (FTNT) is a prominent player in the cybersecurity industry. The company offers cybersecurity and networking solutions. It provides cyber security solutions to various organizations, including enterprises, communication service providers, government organizations, and small businesses.
The stock has declined 25.8% in price year-to-date and 12.2% over the past year to close the last trading session at $53.32. FTNT is trading 28.3% below its 52-week high of $74.35, which it hit on December 29, 2021. However, Wall Street analysts expect the stock to hit $71.89 in the near term, indicating a potential upside of 34.8%.
Here’s what could influence the performance of FTNT in the upcoming months:
FTNT’s total revenue increased 28.6% year-over-year to $1.03 billion for the second quarter ended June 30, 2022. Its product revenue increased 34.3% year-over-year to $400.70 million. The company’s non-GAAP operating income increased 25.6% year-over-year to $255.40 million.
Also, its non-GAAP net income increased 22.3% year-over-year to $194.10 million. In addition, its non-GAAP EPS came in at $0.24, representing an increase of 26.3% year-over-year.
Favorable Analyst Estimates
Analysts expect FTNT’s EPS for fiscal 2022 and 2023 to increase 28.7% and 20.4% year-over-year to $1.03 and $1.24, respectively. Its revenue for fiscal 2022 and 2023 is expected to increase 31.1% and 21.3% year-over-year to $4.38 billion and $5.31 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters.
In terms of trailing-12-month gross profit margin, FTNT’s 75.26% is 48.5% higher than the 50.66% industry average. Likewise, its 17.66% trailing-12-month net income margin is 315.8% higher than the industry average of 4.25%. Furthermore, the stock’s trailing-12-month Capex/Sales came in at 10.03%, compared to the industry average of 2.34%.
POWR Ratings Show Promise
FTNT has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. FTNT has an A grade for Quality, in sync with its high profitability.
It has a B grade for Sentiment, consistent with favorable analyst estimates.
In this highly digitalized world, cybersecurity spending has become crucial for companies to ward off various security threats. Cybersecurity stocks have solid growth prospects in the long term. FTNT is well-positioned to capitalize on the industry tailwinds. Therefore, it could be wise to invest in the stock now.
How Does Fortinet, Inc. (FTNT) Stack Up Against its Peers?
FTNT has an overall POWR Rating of B, equating to Buy. Check out these other stocks within the Software – Security industry with a B (Buy) rating: Radware Ltd. (RDWR), Check Point Software Technologies Ltd. (CHKP), and Trend Micro Incorporated (TMICY).
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FTNT shares were trading at $52.53 per share on Tuesday morning, down $0.79 (-1.48%). Year-to-date, FTNT has declined -26.92%, versus a -12.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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