Shares of Fortinet (ticker: FTNT) experienced a sharp decline of 25% on Friday due to concerns over macroeconomic uncertainties impacting deals. However, Guggenheim analysts point out that this market reaction presents a buying opportunity.
According to Raymond McDonough of Guggenheim, while Fortinet does face challenges in the coming months, there is no evidence to suggest that the company is structurally impaired or that its competitive positioning has deteriorated. McDonough believes that the slowdown can be attributed to two years of exceptional growth followed by a period of adjusting to market conditions. He anticipates that growth will pick up again in 2024 as Fortinet continues to enhance its technology and customers readjust their IT budgets.
Taking these factors into account, Guggenheim has upgraded its rating on Fortinet from Neutral to Buy and set a new price target of $70. This positive outlook is shared by other analysts. Daniel Ives from Wedbush predicts that Fortinet will benefit from increased cybersecurity spending later this year and sets a target price of $69. Similarly, Ittai Kidron of Oppenheimer believes that the setbacks are only temporary and maintains a price target of $95 due to Fortinet’s extensive platform offerings and appealing pricing.
It should be noted, however, that McDonough warns of the possibility of Fortinet falling short on revenue in the second half of the year due to the ongoing product “digestion” period. Historically, this phase lasts for approximately eight quarters, and based on current progress, it is estimated that Fortinet is already three quarters into this downturn, excluding backlog contributions.
Overall, despite the recent setback, Fortinet’s future prospects remain promising, making this dip in stock price an attractive opportunity for investors.
