Truist starts Fortinet at buy calling it ‘one of the best positioned security companies’

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Truist Securities initiated coverage of Fortinet , Inc. (NASDAQ:FTNT) with a Buy rating and set their price target for the stock at $82.00.

Analysts wrote in a note, “FTNT is a leading provider of network security solutions that has evolved into a platform provider for enterprises’ security needs. In our opinion, it is also one of the best positioned security companies to benefit from vendor consolidation based on its product breadth. FTNT’s proprietary ASIC chips offer a key differentiator allowing it to price its products significantly lower vs. its competition while still delivering industry leading performance. We favor its balanced approach to growth and profitability making FTNT a defensible name in a challenging macroeconomic environment, in our view.”

They believe that FTNT will benefit from companies considering their security needs for 2023 and beyond. “FTNT that can provide holistic security solutions as opposed to just tools that address distinct security needs,” wrote the analysts.

Fortinet’s revenues are growing 30%+ while having a 20%+ GAAP operating margin as the security software company’s focus is not just on growth, but also profitability, making it a very defensible name in a challenging macroeconomic environment.

The company’s proprietary Application-Specific Integrated Circuit (ASIC) chips are also a key differentiator allowing it to price its products significantly lower than its competition while still delivering industry-leading performance.

Truist believes that Fortinet can sustain a revenue CAGR in excess of 17% and scale to >30% FCF margin in 10 years, equating to 10x CY24 sales versus the peer group average of 6.4x, and 27.2x CY24 FCF versus the peer group average of 33x.

Shares of FTNT are down 0.15% near end of day trading on Friday.