Why Fortinet, Inc. (FTNT)’s Investors Are Feeling More Secure

Moving forward, what does guidance say?
Security services industry has become a huge market. Plus, with cloud platforms not yet fully understood, companies are feeling insecure about sending their big data into cyberspace. This means that the market is about to expand. And Fortinet guided as if it expects to seize a significant chunk of it.

The company expects full-year revenue to arrive in the range of $625 million to $635 million — ahead of Street forecasts of $618.9 million. This includes first-quarter revenue projections of $141 million, which would represent 20% growth year over year. Following the strong guidance, shares of Fortinet surged 25%.

Fortinet also received a standing ovation from Nomura Securities, which raised its price target on the stock from $24 to $26 per share. Conversely, Check Point disappointed analysts with a revenue range of $355 million to $387 million. Although Check Point is expecting very little growth, the rest of the competition has no plans on ceding the market to Fortinet.

Margin pressure from a company such as Dell Inc. (NASDAQ:DELL) may eventually become an issue. After Dell’s $1.2 billion acquisition of enterprise security giant SonicWall, the company is looking for ways to grow its top line. To that end, it may seek to undercut Fortinet. Fortinet would then be forced to either lower prices or cut R&D investments. Either scenario may prove unfavorable.

In the meantime, there’s plenty to love with this company and the stock. Fortinet’s long-term revenue growth has shown no meaningful signs of slowing down and neither has cash flow. Despite the recent surge in the stock, a case can be made that these shares are yet undervalued — given the expansion potential of this market. Having said that, a P/E of 57 doesn’t imply cheap, either. But that’s never stopped Amazon.com, Inc. (NASDAQ:AMZN).

The article Why Fortinet’s Investors Are Feeling More Secure originally appeared on Fool.com and is written by Richard Saintvilus.

Fool contributor Richard Saintvilus has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Check Point Software Technologies, and Cisco Systems (NASDAQ:CSCO). The Motley Fool owns shares of Amazon.com and Check Point Software Technologies.

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