Fortinet Inc

Fortinet, Inc. (NASDAQ: FTNT) is engaged in offering cybersecurity and networking solutions. The Company provides cyber security solutions to a variety of organizations, including enterprises, communication service providers, security service providers, government organizations and small businesses. The Company’s product offerings consist of its core platform network security products and its enhanced platform technology products, which are offered in a range of forms spanning physical appliances, virtual appliances, software, and cloud-hosted services.

Recent Financial and Business Updates:

• Product Revenue: Fortinet's product revenue reached USD 500.7 million in the first quarter of 2023, reflecting a 35.0% increase compared to USD 371.0 million in the same quarter of 2022.
• Service Revenue: The company's service revenue amounted to USD 761.6 million in the first quarter of 2023, showing a growth of 30.5% compared to USD 583.8 million in the same quarter of 2022.
• Total Revenue: Fortinet recorded a total revenue of USD 1.26 billion in the first quarter of 2023, representing a 32.2% increase compared to USD 954.8 million in the same quarter of 2022.
• Billings: The company's total billings reached USD 1.50 billion in the first quarter of 2023, reflecting a 29.6% increase compared to USD 1.16 billion in the same quarter of 2022.
• Deferred Revenue: Fortinet's total deferred revenue amounted to USD 4.88 billion as of March 31, 2023, showing a 33.4% increase compared to USD 3.66 billion as of March 31, 2022.
• GAAP Operating Income and Margin: The company's GAAP operating income for the first quarter of 2023 was USD 273.5 million, resulting in a GAAP operating margin of 21.7%. In comparison, the GAAP operating income for the same quarter of 2022 was USD 151.0 million, with a GAAP operating margin of 15.8%.
• Non-GAAP Operating Income and Margin: Fortinet's non-GAAP operating income for the first quarter of 2023 was USD 334.0 million, resulting in a non-GAAP operating margin of 26.5%. In comparison, the non-GAAP operating income for the same quarter of 2022 was USD 210.2 million, with a non-GAAP operating margin of 22.0%.
• GAAP Net Income and Diluted Net Income Per Share: The company's GAAP net income for the first quarter of 2023 was USD 247.7 million, with a GAAP diluted net income per share of USD 0.31. This is based on 793.4 million diluted weighted-average shares outstanding. In comparison, the GAAP net income for the same quarter of 2022 was USD 138.4 million, with a GAAP diluted net income per share of USD 0.17, based on 820.8 million diluted weighted-average shares outstanding.
• Non-GAAP Net Income and Diluted Net Income Per Share: Fortinet's non-GAAP net income for the first quarter of 2023 was USD 269.7 million, with a non-GAAP diluted net income per share of USD 0.34. This is based on 793.4 million diluted weighted-average shares outstanding. In comparison, the non-GAAP net income for the same quarter of 2022 was USD 155.1 million, with a non-GAAP diluted net income per share of USD 0.19, based on 820.8 million diluted weighted-average shares outstanding.
• Cash Flow: The company generated USD 677.5 million in cash flow from operations in the first quarter of 2023, compared to USD 396.1 million in the same quarter of 2022.
• Free Cash Flow: Fortinet reported free cash flow of USD 647.2 million in the first quarter of 2023, compared to USD 273.5 million in the same quarter of 2022.
• Share Repurchase Program: Fortinet's board of directors authorized a USD 1.0 billion increase in the authorized stock repurchase under the share repurchase program. As of May 4, 2023, approximately USD 1.53 billion remained available for future share repurchases.

Technical Observation (on the daily chart)

The price of FTNT stock has shown a consistent upward trend since making its 52-week low on November 03, 2022, with a return of approximately 76.21%. Currently, the stock is near an important resistance of USD 75.00-USD 85.00, from where price has taken correction in the past. A breakout in upward direction from this range would likely initiate a new short-term trend in the up direction with targets of USD 90.00-USD 100.00. The RSI (14 period) momentum indicator is at a value of 64.04, correcting from the overbought area, with expectations of some consolidation or a short-term correction before the continuation of the upward trends. Moreover, the price is currently positioned above both the 21-day SMA and 50-day SMA trend-following indicators, which may act as dynamic short-term support levels.

­­­As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Watch’ rating has been given to Fortinet, Inc. (NASDAQ: FTNT) at the current price of USD 74.12 as of June 28, 2023, at 10:20 am PDT.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is June 28, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.