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Fortinet Inc FTNT

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Morningstar’s Analysis

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Fortinet Ends 2020 With Huge Quarter; Investing To Keep Momentum Going in 2021; Raising FVE to $140

Mark Cash Senior Equity Analyst

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.

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Company Profile

Business Description

Fortinet is a cybersecurity vendor that sells products, support, and services to small and midsize businesses, enterprises, and government entities. Its products include unified threat management appliances, firewalls, network security, and its security platform, Security Fabric. Services revenue is primarily from FortiGuard security subscriptions and FortiCare technical support. At the end of 2019, products were 37% of revenue and services were 63% of sales. The California-based company sells products worldwide, with the Americas representing 43% of sales in 2019.

899 Kifer Road
Sunnyvale, CA, 94086
T +1 408 235-7700
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2019
Stock Type Aggressive Growth
Employees 8,238