Guggenheim Upgrades Fortinet (FTNT) to Buy, 'growth to reaccelerate into 2024'

Guggenheim analyst Raymond McDonough upgraded Fortinet (NASDAQ: FTNT) from Neutral to Buy with a price target of $70.00.

The analyst comments "While we recognize Fortinet faces several headwinds heading into the second half of the year, we do not believe the company is structurally impaired, nor do we believe its competitive positioning has deteriorated. On the contrary, when we first launched coverage of the company in January, we underscored our views that Fortinet is a high-quality technology company with a sustainable moat – and those views have not changed. However, at the time, we were concerned that consensus estimates on Product revenue growth for FY23 (+13% y/y) set too high of a bar given two years of outsized growth and the potential for a cyclical downturn, or a period of “digestion,” which seemed all but inevitable. While initial 2023 guidance came in well above Street expectations at the time (+15% y/y Product growth), it has now been reset back towards Street expectations heading into 2023 given (to our surprise) backlog coverage was not enough to offset a deterioration in underlying demand. History would suggest that there is still risk to 2H23 consensus estimates, but with the stock down over 25% one day after the company’s report (vs. the IGV down 1%), we believe that risk has at least partially been priced in. We do expect, however, for growth to reaccelerate into 2024 and while there may be incremental downside in the near term, at 26x our NTM EV/uFCF, we think current levels offer an opportunity to begin building a position in a differentiated, highquality security asset."

For an analyst ratings summary and ratings history on Fortinet click here. For more ratings news on Fortinet click here.

Shares of Fortinet closed at $56.77 yesterday.

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