On Friday, Citi analyst Fatima Boolani increased the price target on Fortinet stock (NASDAQ:FTNT) to $115, up from the previous $101, while maintaining a Neutral rating on the shares. The stock, currently trading at $107.21, is showing signs of being slightly overvalued according to InvestingPro analysis. Boolani highlighted Fortinet’s strong performance, noting the company ended the calendar year 2024 with stability and visibly improving strength. This was demonstrated through healthy product billings and a significant contribution from large and mega deals, which were not included in the guidance but bolstered the company’s results. With a market capitalization of $82.25 billion, Fortinet has demonstrated impressive momentum, trading near its 52-week high.
Fortinet’s growth was attributed to several factors, including a surge in large deal momentum, early signs of growth from end-of-sale driven refreshes, and an expansion in SASE momentum, which saw billings double the aggregate growth of 7%. Additionally, the company’s small and medium-sized business (SMB) and EMEA (Europe, Middle East, and Africa) segments performed exceptionally well, contrasting with the general downturn in the software sector. InvestingPro data reveals the company’s strong financial foundation, with revenue growing at 10.4% year-over-year to $5.71 billion and an impressive gross profit margin of 79.71%.
The company also posted impressive margins, with operating profit margin (OPM) reaching 39%, despite a slight decline in free cash flow margin (FCFM). According to InvestingPro, which offers 18 additional valuable insights about Fortinet, the company maintains strong profitability metrics with a return on assets of 18.74%. Boolani acknowledged concerns such as a deceleration in remaining performance obligations (RPO), an unexpected rise in inorganic billings contributions, and apprehensions related to tariffs, especially as Canada and Latin America represent 15% of Fortinet’s business.
However, Boolani pointed out several positive aspects that balance the risk/reward profile moving forward. These include a better-than-expected product guide for calendar year 2025, estimating around a 10% growth, which is 3 percentage points higher than the Street’s expectations. The company also has a clean runway to achieve mid-30% operating profit margins, strategies for billing re-acceleration, and approximately $2 billion in authorized share buybacks.
The decision to raise the price target is supported by slightly higher terminal multiples in Citi’s estimates. Boolani’s commentary also reflected a smooth transition expected as the incoming CFO, Mr. Ohlgart, takes over from the outgoing Mr. Jensen.
In other recent news, Fortinet, a global leader in cybersecurity solutions, has been the subject of several analyst revisions following a strong quarter. TD Cowen analyst Shaul Eyal raised the price target to $135, citing robust demand, a record number of new logo wins, and solid growth in Unified SASE. Eyal also highlighted the company’s potential for growth due to the ongoing end-of-service firewall refresh cycle. Similarly, RBC Capital Markets adjusted its financial outlook on Fortinet, raising the price target to $115 from $97. Analyst Dan Bergstrom noted solid results and potential upsells related to Secure Access Service Edge (SASE), Security Operations (SecOps), access points, and switches.
BMO Capital Markets analyst Keith Bachman increased the price target for Fortinet shares to $122, attributing the adjustment to a favorable firewall market and early commencement of large customer refresh activities. Despite this, Bachman expressed reservations about Fortinet’s forward-looking guidance. Piper Sandler analyst Rob Owens also raised the price target to $135, emphasizing the company’s strong product growth and record margins. Stifel analysts, led by Adam C. Borg, increased their price target to $115, reflecting Fortinet’s potential in the forthcoming firewall refresh cycle. These are recent developments, reflecting the analysts’ confidence in the company’s performance and future prospects.
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