Fortinet Inc’s (NASDAQ:FTNT) history of reporting strong earnings results and solid fundamentals make FTNT stock an attractive buy ahead of the firm’s Q1 earnings release on Thursday, April 27, after the close.
We recommend that traders build a long position ahead of earnings and sell shares over the course of April 28, the first trading session following the release of earnings results.
Strong History of Earnings Results and Positive Stock Reaction
- Ever since shares of FTNT hit the Nasdaq in late 2009, the company has managed to beat analyst expectations with regard to earnings per share more than 70% of the time. In terms of revenue estimates, Fortinet has beaten Wall Street estimates 96% of the time.
- Shares of FTNT stock have gapped higher following the release of earnings results during 23 out of 29 of the quarters since the company’s initial public offering.
- Recently, traders have responded positively to FTNT earnings reports, pushing shares higher over the course of the trading session immediately following earnings in four of the five previous quarters.
Analyst Sentiment of FTNT
Over the last three months, Fortinet stock has enjoyed a positive performance; since Feb. 2, the date of the latest EPS, FTNT has climbed from $33.18 to $38.52 on April 19. Just one day after the February report, Piper Jaffray gave Fortinet a ratings upgrade to overweight from its previous neutral recommendation. A similar recommendation had been issued by Morgan Stanley earlier in November 2016.
RBC Capital Markets was bullish on FTNT stock after its previous earnings call; the analyst firm projected a target price of $35, which was surpassed in February and has even managed to stay above $36 since then. An even more bullish target price was assigned by investment banking firm Robert Baird in late March, from $38 to $50.
One of the most recent ratings was issued by Oppenheimer, which not only reaffirmed its previous outperform sentiment but also set a $45 target price.
When delving into the fundamentals of Fortinet, a very positive image begins to emerge for value investors. From its Silicon Valley headquarters in Sunnyvale, Fortinet is dedicated to providing information security products and services, particularly for large enterprises and major corporations.
The company has been in business since the year 2000; since then, it has developed a hardware network firewall powered by a proprietary operating system and its very own system-on-a-chip processor. Fortinet has shipped more than 3 million of these firewall units and has secured more than 350 patents. In the final quarter of 2016, the company reported $1.3 billion in cash.
When Robert Baird analysts explained their ratings and target price on FTNT stock, they noted that the company should be considered to be a major player in the information security industry along with market leaders such as Palo Alto Networks Inc (NYSE:PANW) and even Cisco Systems, Inc. (NASDAQ:CSCO).
It is easy to see why Fortinet is in a great environment for growth. Spectacular data breaches now make frequent headlines that often cause embarrassment for their victims.
Case in point: the Shadow Brokers release of CIA exploits and hacks, which were foreshadowed by similar Wikileaks releases. As tech giants such as Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOGL) rushed to fix and patch their operating systems and hackers, the information security community worried about the impact of the releases, which are surely giving malicious hackers ideas as to how they may be able to breach networks in the future.
Institutional investors such as Bank of the Ozarks Inc (NASDAQ:OZRK) and PNC Financial Services Group Inc (NYSE:PNC) have been increasing their positions in FTNT stock lately, and they are doing so with good reason: after all, this is a profitable company that is expected to increase its growth by 22% in 2017.
Tech investors who follow the information security sector should also take note that Fortinet is augmenting its sales efforts to target providers of cloud services and major data centers.
With the ongoing expansion of the cloud computing paradigm and the fact that FortiGate firewalls are more affordable than the Cisco Adaptive Security Appliance, FTNT seems to have a great future ahead.
As of this writing, Don Dion was long FTNT.