Fortinet
Fortinet
FTNT
4.61%
94%
- Shares broke out of flat base with 69.07 entry on May 19
- Stock punched higher Monday, now is testing buy point
- Composite Rating is a perfect 99; Relative Strength is 91
Industry Group Ranking
Emerging Pattern
Flat Base
One of three positive chart patterns to look for when doing technical analysis. It usually occurs after a stock has advanced off of a “cup with handle” or “double bottom” pattern. The “flat base” moves straight sideways in a fairly tight price range for at least five weeks and does not correct more than 15%.
Fortinet (FTNT) is Monday's IBD Stock Of The Day. After retreating through most of 2022, FTNT stock is making a comeback and nearing a fresh record.
XThe Sunnyvale, Calif.-based cybersecurity company is known for its firewalls, and is expanding into other markets, William Blair analyst Jonathan Ho said in a recent note to clients. That includes hybrid and multicloud environments, "zero trust" and endpoint security, and device markets.
Fortinet is eyeing a $180 billion market expected to hit $249 billion by 2026, Ho said.
Though Microsoft recently reported a vulnerability in Fortinet's systems, FTNT stock has jumped back into a buy zone. Wells Fargo analyst Andrew Nowinski says the Microsoft news serves as further proof of the need for cutting-edge cybersecurity technology.
"Nation-stage activity from the likes of China, Russia and others is still rampant," Nowinski said in a note. "That is the main reason why spending on cyber defense cannot slow, despite the ongoing macro challenges. Attackers do not care if the U.S. is heading toward a recession or negotiating a debt ceiling raise. Attacks will likely continue unabated."
FTNT Stock: Little Impact From Microsoft Attack
Last month, Fortinet shares briefly pulled back after Microsoft (MSFT) said a state-sponsored threat actor based in China carried out malicious activity, getting around a Fortinet system. Nowinski said the company would likely release a patch for the operating system.
But he didn't expect much of an impact on FTNT stock, which he rates as overweight with an 80 price target.
"Moreover, (small and midsize business) and (small and midsize enterprise) customers that rely on Fortinet really do not have a better alternative, so we are not expecting much customer churn from this event," Nowinski said.
Shares broke out of a flat base with a buy point at 69.07 on May 19, MarketSmith.com shows. On May 25, Fortinet stock fell as much as 6.7% below that entry — almost triggering a sell rule. But shares regained ground and closed up almost 1% that day. On today's stock market, FTNT stock rose 4.6% to close at 71.27.
Shares now are well within the 5% buy zone, which runs from 69.07 to 72.52.
Firewalls Still Play A Key Role
William Blair's Ho remained positive on FTNT stock following the Microsoft news.
Fortinet's chief marketing officer, John Maddison, laid out the use cases for Fortinet's technology in a recent deep dive with Ho.
"As cloud adoption has grown, it has been fairly contrary to what many industry participants had anticipated: Firewalls still need to play a role in network infrastructure," he said.
Vendors prefer a platform that has a suite of capabilities. Fortinet's systems can segment networks and protect the edges of data systems. The company also has cloud-based products, firewall-as-a-service and industrial firewalls.
"The company appears to have a sound strategy for providing a cohesive approach for packaging these capabilities in its broadening solution suite," he said.
Ho has an outperform rating on FTNT stock.
Sales Growth Buoys FTNT Stock
All of this is showing up in Fortinet's financial reports. In the first quarter, adjusted profit rocketed 79% to 34 cents per share. Sales surged 32% to $1.26 billion.
TD Cowen analyst Shaul Eyal noted that service revenue grew above 30% for the first time in six years. Eyal has an outperform rating and 85 price target on FTNT stock.
In the current quarter, analysts call for Fortinet to earn 34 cents a share on $1.31 billion in sales, up a respective 42% and 27%, according to FactSet.
Bullishly, FTNT stock has a perfect Composite Rating of 99, according to IBD Digital. This means shares rank in the top 1% of all stocks when it comes to fundamental and technical measures. The stock also has a strong Relative Strength Rating of 91, putting FTNT stock in the leading 1% in terms of 12-month performance.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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