Like many of its Silicon Valley compatriots, if Fortinet Inc (NASDAQ:FTNT) was a person, it wouldn’t be old enough to buy a beer yet.
Started in Y2k, FTNT is a cybersecurity firm that focuses on network security for enterprises, service providers and government entities. This isn’t a unique client focus, but it is a very good one.
And it shows that FTNT is very serious about security. These are organizations that depend on the highest levels of security and need it to be up to date. If you are protecting against last year’s — or nowadays it’s more like last month’s or yesterday’s — malware or viruses, you’re jeopardizing significant stakeholders and customers.
And the fact that FTNT has been doing this for nearly two decades is an indication of their foresightedness in the world of cybersecurity.
As many firms in this sector do, it puts out monthly cybersecurity notices for the public to reveal what the major threats are, what kinds of threats they are (mobile, online, software, apps, IoT, etc) and whether they’re trending up or down.
Just as the complexity of technology has increased and bled into most aspects of our daily lives, so have the threats from bad actors.
That’s why the cybersecurity space is a significant megatrend and why I have been so bullish on FTNT. There is more opportunity in this sector as more companies have come to rely on the internet to conduct business.
Attackers are always looking for exploits, places where programmers or developers have left a small window of opportunity for a hacker to enter and do their dark magic.
If you look at the numbers in this sector, you can see that business continues to be brisk for most of the players because demand is expanding.
When you’re in this kind of expanding market, what tends to happen is some players get more attention than others, even if they’re all equal. Also, newer players that exploit new tech tend to grab more headlines whether they’re underlying technology is better or not.
For example, FTNT has been around a while but isn’t a big integrated player like Cisco Systems, Inc. (NASDAQ:CSCO) or a cooler, younger player (founded 2005) like Palo Alto Networks Inc (NYSE:PANW).
In the past few quarters, the analysts have consistently said that FTNT isn’t going to see the wins and growth that these other players will see. And the numbers come out and it proves them wrong.
This happened again in Q1 this year, which was reported in early May. It beat analysts’ expectations significantly once again.
The number of deals was up 21% compared to the same quarter last year. Deals worth more than $50,000 were up 20%. Revenues were up 17% and even exceeded management’s expectations. And gross margins expanded 220 basis points, also higher than management’s expectations.
Up about 60% in the past 12 months, FTNT stock still has room to run.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
