Analyst Note
| Mark Cash |Narrow-moat Fortinet’s 21% year-over-year revenue growth and adjusted EPS of $1.06 easily topped FactSet consensus estimates in the fourth quarter. Billings increased by 20% year over year. Fortinet executed strongly across all geographies and had robust demand across the customer spectrum amid the pandemic. The firm expects to focus on growth for the next few quarters by ramping up development efforts and sales and marketing capacity. We believe it is the right strategy to seize the opportunities in secure networking, cloud security, and 5G security, and Fortinet has the war chest to fund the investments. In our view, Fortinet’s security fabric is well positioned to capitalize on the trend of customers consolidating spending toward fewer vendors and that the firm is in a unique position as the networking and security markets converge. Based on higher growth expected with a resilient, strong operating profile, we are increasing our fair value estimate to $140 from $127 and we view shares as slightly overvalued.