On Tuesday, Cantor Fitzgerald adjusted its price target for Fortinet (NASDAQ:FTNT), a global leader in broad, integrated, and automated cybersecurity solutions. The firm's analyst has increased the 12-month price target from $88.00 to $95.00 while maintaining a Neutral rating on the stock.
The revision follows Fortinet's Analyst Day held in New York, which showcased the company's long-term financial goals, forthcoming product refresh cycle, and ongoing growth initiatives. The firm noted these elements as the primary reasons for the updated price target.
The new price target of $95 is derived from an adjusted expected enterprise value to sales (EV/Sales) multiple, which has been raised to 10.6 times from the previous 9.8 times. This change reflects a more positive outlook on fundamental demand and Fortinet's consistent performance. Additionally, the target is based on an anticipated enterprise value to free cash flow (EV/FCF) multiple of 30.2 times, up from 27.9 times.
Cantor Fitzgerald's valuation also incorporates the potential for Fortinet to sustain its "Rule of 45" algorithm, a financial benchmark suggesting that a company's combined revenue growth rate and operating margin should equal or exceed 45%. This expectation is set against the backdrop of Fortinet's peers, which currently trade at an average of 9.7 times EV/Sales and 26.7 times EV/FCF for the year 2025.
The firm's analyst emphasized the importance of the Analyst Day in providing insights and reinforcing confidence in Fortinet's long-term sustainability and growth prospects. Despite the raised price target, the firm continues to recommend a Neutral stance on Fortinet shares, suggesting a balanced view of the company's investment potential relative to market conditions and industry performance.
In other recent news, Fortinet, a leading cybersecurity company, has seen several financial firms adjust their outlook on the company's stock. RBC Capital, JPMorgan, and Deutsche Bank (ETR:DBKGn) have all increased their price targets to $97, $99, and $90 respectively, while maintaining neutral ratings.
These adjustments follow Fortinet's investor day and robust Q3 2024 results, which saw a 13% increase in total revenue to reach $1.508 billion. The company also reported record gross margins of 83.2% and an operating margin of 36.1%, driven by a 2% growth in product revenue and a significant 19% increase in service revenue, largely due to strong demand for SaaS solutions.
Fortinet also announced the appointment of Janet Napolitano, former U.S. Secretary of Homeland Security and Arizona Governor, to its board of directors, a move expected to enhance the company's strategic initiatives in the cybersecurity sector. Despite these successes, Fortinet issued cautious future billings guidance due to large deals maturing and slower progress on larger deals in Q4. However, the company anticipates a significant firewall refresh cycle to begin in 2025.
InvestingPro Insights
Fortinet's recent performance and market position align well with the analyst's optimistic outlook. According to InvestingPro data, the company's revenue growth stands at 10.4% for the last twelve months as of Q3 2024, with a quarterly growth of 13% in Q3 2024. This solid growth trajectory supports Cantor Fitzgerald's positive revision of the price target.
The company's impressive gross profit margin of 79.71% for the last twelve months as of Q3 2024 underscores its operational efficiency, which is crucial for maintaining the "Rule of 45" algorithm mentioned in the analyst report. This is further reinforced by an InvestingPro Tip highlighting Fortinet's "impressive gross profit margins."
Another InvestingPro Tip notes that 35 analysts have revised their earnings upwards for the upcoming period, which aligns with the overall positive sentiment expressed in the Cantor Fitzgerald analysis. This widespread analyst optimism suggests a strong consensus on Fortinet's future performance.
It's worth noting that InvestingPro offers 18 additional tips for Fortinet, providing investors with a comprehensive view of the company's financial health and market position. These insights can be particularly valuable for those looking to delve deeper into Fortinet's investment potential beyond the scope of this analyst report.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.