Fortinet (ticker: FTNT), a leading cybersecurity company, saw its stock plummet 19% to $61.39 in premarket trading on Friday. This significant decline in share price had a ripple effect on other cybersecurity names in the market.
Deals Delayed Due to Macroeconomic Uncertainty
Fortinet’s Chief Financial Officer, Keith Jensen, revealed that the company experienced a delay in closing deals due to macroeconomic uncertainty. An “unusually large volume of deals” that were expected to be completed in June were pushed back to future quarters. This uncertainty affected Fortinet’s billings performance and resulted in an elevated number of postponed deals.
Disappointing Third-Quarter Guidance
Adding to the negative outlook, Fortinet’s third-quarter revenue guidance fell short of analyst expectations. The company anticipates revenue to range between $1.315 billion and $1.375 billion, lower than the expected $1.38 billion.
Despite these challenges, RBC Capital Markets analysts believe that the long-term opportunity for Fortinet remains intact. However, they caution that investors may be hesitant as they assess the trajectory of billings for the coming year. As a result, RBC Capital Markets maintains a Sector Perform rating on the stock with a price target of $68.
A Strong Competitive Position with Uncertain Demand
Guggenheim analysts also maintain a Neutral rating on Fortinet, acknowledging the company’s strong competitive positioning and ample growth opportunities. However, they express concerns about whether underlying demand will rebound in the near to medium term. They question whether this slowdown is a result of increasing competitive pressure or a shift in architectural preferences away from hardware form factors.
Balanced Earnings Report
While overshadowed by the disappointing guidance and delayed deals, Fortinet’s adjusted earnings for the second quarter exceeded expectations. With earnings of 38 cents per share, beating the estimated 34 cents, the company demonstrated its ability to perform well amidst challenging market conditions. However, revenue of $1.29 billion narrowly missed estimates by a small margin.
