Shares of
Fortinet
were knocked off their steady march upward after the cybersecurity company flagged macroeconomic concerns. The market has overreacted and that’s a chance to buy the stock, according to Guggenheim.
Fortinet
(ticker: FTNT) stock dropped 25% on Friday after it warned that deals were being delayed due to macroeconomic uncertainty.
“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,” wrote Guggenheim’s Raymond McDonough.
Fortinet’s slowdown can instead be attributed to two years of outsized growth and an inevitable period of “digestion” of its products, according to McDonough. He expects growth to reaccelerate in 2024 as Fortinet builds on its technology and customers reset their IT budgets.
McDonough raised his rating on Fortinet to Buy from Neutral and introduced a new price target of $70. Fortinet shares were up 2.3% in premarket trading at $58.09.
The reaction was in line with that of other analysts. Wedbush’s Daniel Ives wrote post earnings that Fortinet should benefit from cybersecurity spending later this year, and gave the company a target price of $69, down from $70. Oppenheimer’s Ittai Kidron said the issues only looked temporary and kept a price target of $95 on the stock, noting Fortinet’s platform breadth and attractive pricing.
Guggenheim’s McDonough warned that Fortinet could still disappoint on revenue in the second half of this year.
“If history is any indication, a period of product “digestion” is likely to last about 8 quarters, and we suspect we are three quarters into a downturn when excluding backlog contribution,” McDonough wrote.
Write to Adam Clark at [email protected]
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