Fortinet Inc Up 51% in 2019, but This Is Why 2020 Will Be Even Better

Fortinet Inc: Bullish Trend Expected to Continue for Another DecadeFortinet Inc Predicts Market-Beating Growth for Next 10 Years

Cybersecurity firm Fortinet Inc (NASDAQ:FTNT) has been enjoying a great year, soaring about 50% since the start of 2019.  That strong share-price growth has been fueled by strong financial results.

The long-term future looks even brighter for Fortinet.

Why? When commenting on its third-quarter results, management said it is “focused on driving better than industry average growth for at least the next decade.” (Source: “Fortinet Reports Third Quarter 2019 Financial Results,” Fortinet Inc, October 31, 2019.)

We obviously can’t predict the future, but all things being equal, it appears that Fortinet stock could be in for another momentous ride over the next 10 years.

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FTNT Stock Overview

Sunnyvale, California-based Fortinet sells firewall, anti-malware, Web filtering, and anti-spam technology. (Source: “Powering WAN Edge
Transformation
,” Fortinet Inc, last accessed December 12, 2019.)

Despite being one of the smaller cybersecurity firms out there, it actually provides the world’s most deployed network security solution.

Fortinet is also the only cybersecurity company to excel in all key stages of network security (detection; prevention and remediation; integration; performance and value). This might explain why it sells its products to more than 425,000 customers around the world.

Fortinet Stock Information

Market Cap $17.8 Billion
52-Week Change 39%
52-Week High $106.00
52-Week Low $64.41
Shares Outstanding 171.0 Million
Float 146.4 Million
50-Day Moving Average $96.82
200-Day Moving Average $83.64

(Source: “Fortinet, Inc. (FTNT),” Yahoo! Finance, last accessed December 12, 2019.)

Fortinet Inc has indeed had a strong year, with FTNT stock advancing more than 50%.

That growth is not a fluke. Fortinet has a long history of rewarding buy-and-sell investors. Since the beginning of 2010, Fortinet stock has soared 1,080%. Or, put another way, over the same time frame, it achieved a compound annual growth rate of about 30%.


Chart courtesy of StockCharts.com

Q3 Revenue, Deferred Revenue, & Earnings Up

On October 31, Fortinet announced that its revenue for the third quarter ended September 30 increased 21% year-over-year to $547.5 million. Product revenue was up 20% year-over-year while service revenue did slightly better, increasing 21%. (Source: Fortinet Inc, October 31, 2019, op. cit.)

Total deferred revenue was almost $2.0 billion, a 26% increase from the $1.5 billion in deferred revenue as of September 30, 2018.

Fortinet reported third-quarter generally accepted accounting principles (GAAP) net income of $79.8 million, or $0.46 per share, a 36% increase from the third quarter of fiscal 2018.

Non-GAAP net income for the third quarter of 2019 was $116.9 million, or $0.67 per share, a 35% increase from the third quarter of last year.

Cash flow from operations during the third quarter was $221.2 million, a 25% increase from the third quarter of 2018. Free cash flow was $203.7 million, a 28.5% improvement from the same prior-year period.

Guidance

For the fourth quarter of 2019, Fortinet expects:

  • Total revenue in the range of $595.0 to $610.0 million. At the midpoint, that represents year-over-year growth of 18.3%.
  • Billings in the range of $750.0 to $765.0 million, for a midpoint year-over-year increase of 16.5%.
  • Diluted non-GAAP net income per share in the range of $0.69 to $0.71. At the midpoint, that represents a year-over-year increase of 18.6%.

For full-year fiscal 2019, Fortinet expects:

  • Revenue in the range of $2.13 to $2.15 billion. In fiscal 2018, Fortinet reported full-year revenue of $1.8 billion.
  • Billings in the range of $2.55 billion to $2.65 billion, up from $2.15 billion in 2018.
  • Diluted non-GAAP net income per share in the range of $2.39 to $2.41. In 2018, the company reported non-GAAP diluted net income per share of $1.84.

Analyst Take

Fortinet Inc is not a name that comes to mind for most cybersecurity investors, but it should.

The company has a long history of reporting strong financial results, and its sector-trumping stock has been trending steadily higher over the last 10 years. Furthermore, management expects the upward trajectory for FTNT stock to continue for the next decade.