Something just a little, well, backward happened to cybersecurity stock Fortinet (NASDAQ:FTNT) in Monday afternoon trading. Fortinet stock gained ground after a surprise ratings hike. While Fortinet only ended up fractionally in Monday afternoon’s session, it was still a bit of a puzzle how it even happened to begin with.
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The hike took place when Fortinet shares got a surprise upgrade from Guggenheim. Guggenheim analyst Ray McDonough did the hiking, upgrading Fortinet from “neutral” to Buy. McDonaugh noted that Fortinet “…faces several headwinds into the second half of the year.” Despite that, however, McDonough didn’t consider Fortinet to be “…structurally impaired,” and its “…competitive position…” hadn’t slipped any either. Okay, all fine and well so far, but what’s so strange about this was that, just days prior, Fortinet issued a cut to its full-year guidance.
That actually helped McDonaugh make the call, noting that the risk involved was “…at least partially priced in….” Further, he expected a period of product “digestion” that would need about two years to fully run. We’re nearly halfway through, McDonaugh noted, which means that a discounted Fortinet might ultimately make a good buy down the road, once that period of product digestion safely passes. With others pointing out that Fortinet’s hardware backlog is out of steam, but its service growth is doing well, this makes particular sense.
Analysts in general also believe Fortinet’s best days are ahead. Analyst consensus calls Fortinet stock a Strong Buy, with Buy ratings outstripping Hold ratings by four to one. Further, with an average price target of $78.21, Fortinet stock comes with a 36.73% upside potential.
