On Wednesday, Fortinet Inc (NASDAQ:FTNT) received an updated price target from Jefferies, with the firm raising the target to $70.00 from the previous $65.00 while maintaining a Hold rating on the stock.
The adjustment follows Fortinet's second-quarter performance, which displayed flat year-over-year billings, a result considered better than expected. Additionally, the company's operating margin of 35% significantly exceeded forecasts.
According to the firm, despite Fortinet maintaining its billing guidance for 2024, the delay of its product refresh to 2025, previously anticipated in the second half of 2024, introduces a higher level of risk.
Nonetheless, the analyst pointed out that Fortinet's shares are likely to find a higher floor due to the improved margins, which are projected to remain robust with a non-GAAP operating margin guidance of over 30% for the third quarter and the full year 2024.
The firm noted that the sustainability of Fortinet's margins contributes positively to the stock's valuation. The analyst also mentioned that while they are waiting for further evidence of a billing inflection and the product refresh before adopting a more constructive stance, the shares of Fortinet in after-hours trading were valued at 25 times next twelve months enterprise value to earnings before interest and taxes (EV/EBIT), which aligns with the 25 times multiple of large-cap peers.
Fortinet's financial health and operational efficiency, as indicated by the high operating margin and the maintained billing guidance, seem to underpin the Hold rating. The firm's analysis suggests that while there are positive aspects to Fortinet's financials, potential investors may also consider the delayed product refresh when evaluating the company's future prospects.
InvestingPro Insights
As Fortinet Inc (NASDAQ:FTNT) navigates through its product refresh delay and maintains strong financial health, InvestingPro data and tips provide a deeper understanding of the company's current valuation and performance. The company's market capitalization stands at a robust $42.64 billion, and it boasts a high gross profit margin of 78.09% over the last twelve months as of Q2 2024, reflecting operational efficiency. Despite a challenging environment, Fortinet has managed an 11.02% revenue growth during the same period, demonstrating resilience in its business model.
InvestingPro Tips highlight that Fortinet's management has been actively repurchasing shares, signaling confidence in the company's value. Additionally, Fortinet holds more cash than debt on its balance sheet, providing financial stability and flexibility. These factors, coupled with the company's impressive gross profit margins, are key considerations for investors. For those seeking more detailed analysis, InvestingPro offers 14 additional tips on Fortinet, available at https://www.investing.com/pro/FTNT, which can guide investment decisions with greater context and insight.
While the delayed product refresh introduces some uncertainty, the company's strong fundamentals, as reflected in InvestingPro's data, suggest that Fortinet is well-positioned to continue its growth trajectory. The insights provided here are just a glimpse of the comprehensive analysis that InvestingPro offers, equipping investors with the data needed to make informed decisions.
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