FTNT - Fortinet: Market Overreaction Seems Unwarranted
2024-05-08 04:20:49 ET
Summary
- Fortinet's Q1 earnings led to a 10% decline in share price, but a closer look reveals a well-positioned, high-growth company.
- The company's core business of secure networking is growing, with market share gains in this segment.
- Record cash flows and rising margins indicate strong business execution and potential for a quick rebound.
Investment Thesis
In one of my previous articles , I made the analogy that the stock market is like a manic depressive friend who is usually high functioning but who occasionally goes off their meds and gets either irrationally exuberant or depressed in their valuations of companies.
The latter of the two scenarios has come to be for the cybersecurity company Fortinet (FTNT). The recent release of FTNT's Q1 earnings was met by an almost 10% decline in the share price. While the results of Q1 earnings were mixed, the most immediately available reason for the sharp sell-off is likely the decline in non-GAAP revenue from Q4 2023 ($1.415B) to Q1 ($1.353B), and decline in (GAAP) net income from $310.9M in Q4 2023 to $299.3M in Q1 2024. However, a closer look at the composition and trajectory of the company's performance reveals several characteristics of a well-positioned, high-growth company that is primed for a quick rebound....
Fortinet: Market Overreaction Seems Unwarranted